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INTRODUCTION
VCTs are a well-
established and
well-known asset
class that has been
around for more
than 20 years now.
But considering
their generous tax
advantages and the
strong track record
of some VCTs, it
could be argued
that they have not
received the levels
of investment that
they should have.
Have advisers been under-weighting an
investment that could deliver real value
for their clients? Has a lack of knowledge
or a fear of the non-mainstream
held advisers back? Is it down to the
marketing advantages that Open-
Ended Investment Companies had
pre-RDR, when they could pay advisers
commission? Or perhaps advisers have
been right to be wary of these higher
risk vehicles where information on the
underlying investments is more opaque.
Whatever the reasons, this report is
going to look at the investment case
for VCTs again. With lower limits on
the amounts that can be invested in
pensions, changes to the rules on how
dividends are taxed and consumers
demanding more from their advisers,
VCTs could be an important tool in
advisers’ kit bags. Interest rates look set
to stay low, so assets that can provide
high yields are in demand. But with new
changes to the VCT regime announced
in the summer Budget to ensure
ongoing compliance with European
State Aid rules, advisers also need to
be mindful of how those changes will
impact the sector and what they are
likely to do to the risk profiles of VCTs.
We’ve got an in-depth look at this on
page 30.
We’ll outline the tax breaks for investors
(on page 16), the qualifying rules for
investee companies (page 17), the range
of investment strategies and different
types of VCT on offer (page 19), the
historical performance (page 33) and
the outlook for the sector (page 87).
We’ll capture all the regulatory and
compliance information in one place
(page 48), take a look at the risks (page
27), consider the due diligence advisers
and investors need to undertake to try
to ensure those risks are mitigated and
think about compliance and suitability
(page 48 to 51). And, as we do with all
of our reports, we’ve also surveyed
advisers, investors and providers to
give us a sense of where the market is at
right now (page 59).
The report starts off with the basics
and then goes into more detail as we
go on. It’s not necessary to read it from
start to finish in the conventional way -
readers might prefer to dip in and out of
sections that interest them - and we’ve
supported our copy with charts, tables
and visuals so that you can swiftly and
easily grasp the information we present.
For readers who just want a quick
overview, the executive summary is on
page 10, the key findings are on page 7
and our conclusions and outlook are on
page 87.
We’ve included our analysis of the
sector and our market research towards
the end, from page 52 onwards. It’s this
research and analysis that forms the
backbone of the report and drives a lot
of our copy. We DON’T assess individual
offers - for that level of analysis we
recommend advisers sign up to one of
the dedicated review sites - our focus
is on delivering a top-down, whole-of-
market view.
And that’s it! 30,000 words over 90
pages that aims to bring our readers up
to date with the VCT sector. Hopefully
readers of the report will find all of the
information they need to assess and
consider the VCT market here.
Experienced advisers will be able to
refresh their technical knowledge, stay
up-to-date with the latest developments
and by reading our market analysis, get
a sense of what is out in the market for
investment today.
Less experienced advisers, who are
perhaps approaching the sector for
the first time, will be able to quickly get
up to speed and approach the market
and speak to clients about VCTs with
confidence.
Even those advisers who don’t feel
that VCTs have a place within their
investment proposition will be able to
say that they reached that conclusion
from an informed position.