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of information to do this will be the
managers themselves, followed by
independent review sites and industry
watchers such as MICAP, Tax Shelter
Report and Tax Efficient Review and
firms that consult to the industry, such
Roberston Hare, RW Blears, BDO, DWF
and PwC.
And there is a positive aspect
to legislative changes - they do
demonstrate the Government’s
determination to retain the schemes
by ensuring they stay within State Aid
guidelines, and ensuring they continue
to represent good value for money for
taxpayers. We also suspect that the
changes this year will be the last for
a while and will usher in a period of
stability for the VCT industry.
PERFORMANCE
MEASUREMENT
“Past performance is not a guarantee of
future returns” is the all too familiar risk
warning for consumers. It is however,
one of the few objective indications of
an investment manager’s competence
(or lack of it), so it would be remiss not
to examine VCT performance here.
In the
Investment Case
section we
showed a favourable performance chart
for the two main VCT sectors, VCT AIM
Quoted and VCT Generalist. The chart
above is the same data, but without
reinvestment – so when we compare the
two we can see what an important part
income and reinvestment plays in the
performance of VCTs.
And we can see by looking at the ten
year picture that (along with all other
asset classes) there was a severe
downturn in 2008. This is the period
when discounts to the NAV would
have widened, and exiting at a fair
price would have been problematic.
What is encouraging is that we can
see that investors who held on were
eventually rewarded (and investors
smart enough to buy near the bottom
of the market would have done well). It
also tells us that VCTs are not, generally,
diversifiers from mainstream assets -
their performance in the crash of 2008
mirrors the main market.
“Advisers should be looking for established managers that successfully weathered difficult markets and been
able to adapt to State Aid rule changes. A track record of delivering consistent and growing dividend
payments, with genuine capital growth should be a key attribute”
Chris Hutchinson, Unicorn Asset Management
80%
60%
40%
20%
0%
-20%
-40%
-60%
-80%
“As a respected market commentator once said, “Elephants don’t gallop” –
larger companies do not have the same propensity for growth as smaller
companies. The potential returns available through VCT investments may
therefore be significantly higher in the long-term, which makes them an
attractive investment for those comfortable with the risks associated with
smaller company investing”
Paul Latham, Octopus Investments
VCT SECTOR PERFORMANCE
(2010-2015)
VCT SECTOR PERFORMANCE
(2008-2015)
Source: FE Analytics
Performance over the five years to August 2015 (rebased, income not reinvested)
Performance over the ten years to August 2015 (rebased, income reinvested)
Source: FE Analytics
25%
20%
15%
10%
5%
0%
-5%
-10%
Aug 10
VCT AIM Quoted Sector
VCT Generalist Sector
Aug 11
Aug 12
Aug 13
Aug 14
Aug 15
100%
Nov 05 Nov 06 Nov 07 Nov 08 Nov 09 Nov 10 Nov 11 Nov 12 Nov 13 Nov 14 Nov 15
FTSE 100
VCT Generalist
FTSE AIM All-Share
VCT AIM Quoted