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WHICH TYPE OF VCTs DO YOU RECOMMEND?
The VCT investment market offers a
range of different type of investments.
As previously mentioned, VCTs can
be categorised by the sector of the
investment (Generalist, Specialist or AIM
Quoted), and the lifespan of the VCT
(Evergreen or Limited Life).
88% of advisers recommend Generalist
VCTs that invest in unquoted companies
in a range of different sectors. This type
of investment allows investors to benefit
from wider range of investee companies,
potentially offering greater diversification,
and advisers may feel more comfortable
recommending these VCTs.
68% of advisers recommend AIM Listed
VCTs. These investments are seen as
more liquid compared to Generalist,
because the underlying company shares
can be sold on the secondary market
as an exit strategy, although the ability
to achieve a good price or to meet
investors’ demands if they all decide to
withdraw at one time may be limited.
57% of advisers recommended Specialist
VCTs which invest in companies focused
in specific sectors and therefore could
be more risky since they only focus
on one area of the market and lack
diversification. On the other hand,
projects that return to cash quickly
could be said to be less risky. Clients
may have a particular interest, such as
film for example, and a VCT may be a
tax-efficient way for them to access this
sector.
45% of advisers recommend Limited Life
investments that usually look to repay
the capital back to investors after the
minimum 5 year holding period and 43%
of advisers recommended Evergreen
investments.
When asking advisers the percentage of a portfolio they would recommend be
placed in a VCT, 41% believe it depends on the client. These respondents were asked
to give an explanation and the responses made clear that there are many factors
that influence an adviser’s decision, such as their client’s objectives, attitude to risk,
need for income, capacity for loss, and security of their income. 47% of the survey
respondents recommend 5%-10% of a portfolio, and 12% of advisers had a more
conservative response with them recommending clients to hold less than 5% of their
portfolio in VCTs. Finally, none of the financial advisers recommended investors have
more than 10% invested in VCTs.
WHAT PERCENTAGE OF A CLIENT’S TOTAL PORTFOLIO WOULD YOU
RECOMMEND IS PLACED IN VCTs?
WHAT AGE IS YOUR TYPICAL
INVESTOR FOR VCT?
The typical age of a VCT investor is between
40-65 years old. These investors are usually
at the peak of their working life, and will
probably be building up their savings for
when they retire. They have had time to
build some wealth and feel more able to
target greater returns by investing in riskier
investments such as VCTs.
Only 3% of advisers recommended VCTs
to investors below the age of 40. These
individuals may have other financial goals,
such as saving for a family or buying a
home, and higher risk investments may
not fit into their plan at the moment.
However HNW clients in this age bracket
may be suitable, as they still have many
working years ahead of them and could
afford to take more risk.
13% recommended VCTs for investors
above 65 years old. They are likely to be
more focused on capital preservation.
AGE OF
TYPICAL
INVESTOR:
88%
GENERALIST
68%
AIM QUOTED
57%
SPECIALIST
45%
LIMITED
LIFE
43%
EVERGREEN
12%
47%
<5%
5-10%
>10%
Depends upon
the client
0%
41%
<40
3%
40-60
84%
>60
13%