61 / 92
61
“VCTS ARE ONLY APPROPRIATE
WHEN BOTH ISA AND PENSION
ALLOWANCES HAVE BEEN
MAXIMISED”
DO YOU THINK IT IS
IMPORTANT TO USE MORE
THAN ONE VCT PROVIDER?
HOWLONG SHOULD A CLIENT
EXPECT TOHOLD THEIR SHARES
BEFORE LOOKING TO EXIT?
Only 28% believed that VCTs investments
only become appropriate once ISA
and Pensions contributions have been
maximised. The majority believe that
VCTs can coexist alongside these other
options as they offer additional benefits,
such as diversification and ability to
achieve higher returns.
The most important criterion (67%) when choosing a VCT is the managers’ performance track record. 34% and 31% of respondents
cited the economic sector the fund is exposed to and third party reviews respectively, as the second and third most important criteria
when choosing a VCT. Manager’s size and reputation (23%), previous good experience with the manager (18%) and the forecast timing
of exit (18%) were also important criteria. Referring back to a point made earlier in the report about the barriers to entry for new VCT
providers; the importance of track record and previous experience with manager further demonstrates how it is difficult for a new
provider to enter this space.
90% of financial advisers believe it is
important to use more than one VCT
provider. By choosing different managers
advisers can diversify across different
styles of investment, different sectors
and companies at different stages of
development. Most VCTs will usually
invest in around 10 to 30 companies.
Therefore, greater diversification is
difficult to achieve without investing
across several VCTs and VCT providers.
The majority (64%) of financial advisers
feel that their clients should hold onto
their VCTs for at least 6-10 years. While
the minimum holding period to achieve
the tax benefits is only 5 years, it will
often take longer to exit. Advisers seem
to be very aware of this issue, and are
appropriately making clients aware.
Using Limited Life VCTs would be one way
to address this issue if it was a concern.
“The majority of advisers believe that VCTs can coexist alongside Pensions and ISAs as they offer
additional benefits”
WHICH VCT INVESTMENT STRATEGIES
DO YOU RECOMMEND TO YOUR CLIENTS?
These are top level strategies, in which advisers may favour certain investment
managers, sectors or opportunities at a certain time. The majority of respondents
(58%) recommended investment strategies for capital growth or income. These two
options provide clients with the opportunity of gaining higher than average returns
and increase their income due to the income or Capital Gains Tax relief. 48% of advisers
recommended capital preservation as a strategy to invest in VCTs. This is the strategy
most commonly associated with Limited Life VCTs.
WHAT ARE THE 3 MOST IMPORTANT CRITERIA WHEN CHOOSING A VCT?
6-10 years
+10 years
Depends on
Only the minimum
5 years
8%
10%
18%
64%
Yes
No
10%
90%
Agree
Disagree
28%
72%
Most important
2nd most important
3rd most important
Manager’s performance track record
Economic sector fund is exposed to
Third party reviews
The forecast level of return
The forecast timing of exit
Quality of info provided on fund
Ease of investment
Previous good experience with the manager
Manager’s size & reputation in marketplace
31%
15%
21%
18% 8%
8%
5%
5%
5%
3%
13%
18%
8%
5%
3%
10%
10%
3%
3% 3%
8%
15%
8%
10%
0%
20% 30% 40% 50% 60% 70%
CAPITAL
GROWTH
INCOME
CAPITAL X
PRESERVATION
& GROWTH
57% 57%
48%