BR Report 2019

20 21 Initial fees much the same As last year, around two thirds of providers charge an initial fee on their offering, of which only a couple are made to investees rather than investors. The average initial fee has dropped marginally from 1.13% to 1.09%. AMC remains most popular charge Virtually all managers charge an AMC. For AMCs payable by investors, there has been almost no change since last year. For those payable by investees, the maximum has dropped by a quarter from 2% to 1.5%. A small minority of offers (less than 10%) charge AMC to both investors and investees. The breadth of the AMC range has closed since last year - with the average dropping from 1.35% to 1.26%, the most commonly charged fee dropping from 1.5% to 1%, and the maximum coming down from 3.5% last year. There is a trend to note here with the 2017 average at 1.42% which equates to a reduction of over 11% in the last two years. Average Mode Minimum Median Maximum 1.09% 0% 0% 1.00% 3.50% INITIAL CHARGE OF OPEN OFFERS CHARGED TO INVESTORS* Market Update / Sector Analysis Market Update / Sector Analysis AMC OF OPEN OFFERS CHARGED TO INVESTOR* Average Mode Minimum Median Maximum 0.98% 1.00% 1.00% 0% 2.00% AMC OF OPEN OFFERS CHARGED TO INVESTEE* Average Mode Minimum Median Maximum 0.32% 0% 0% 0% 1.50% TOTAL AMC OF OPEN OFFERS Average Mode Minimum Median Maximum 1.26% 1.00% 1.25% 2.25% Diversification levels increasing Perhaps unsurprisingly given the context of current uncertainties, the number of investee companies targeted by an offering is increasing, up to 16 from 14 last year and 13 in 2017. The average for AIM offerings is 27 investees - up by one from last year. TARGET NO. OF INVESTEE COMPANIES *Excluding adviser fees AVERAGE MINIMUM SUBSCRIPTION UP The mode for minimum subscription amounts is £25,000 - a level that gives access to the many mass affluent, the value of whose property has dragged them into scope of IHT. However, the average minimum subscription has climbed by over 11%, almost £5,000 to £48,417 from £43,468 last year. This halts the downward trend seen since 2017 and perhaps suggests growing confidence among BR managers that there are still significant amounts of money for which their services are appealing. Average £48,417 Mode £25,000 Minimum £10,000 Median £27,500 Maximum £200,000 Target returns strengthen again While the most commonly quoted target return stays at 3%, the average has gone up from 4.49% to 4.7%. It is a major jump from the average of 4.06% in 2017 and has no doubt been influenced by the average target return of offers launched between March 2018 and February 2019 being at 5.88%. This upward trend is another pointer to more confidence among managers, but also poses questions about possible changes to the risk and reward profile of some BR offers. Average 4.70% Mode 3.00% Minimum 2.00% Median 4.00% Maximum 10.00% Average Mode Minimum Median Maximum 16 1 1 19 65 The mode and median figures may be misleading as they highlight offers which use a single underlying company controlled by the manager to make investments into multiple BR-qualifying companies. 0% “With Business Relief a key component of tax planning, it continues bringing benefits to clients and the economy, supporting tax mitigation aims alongside growing companies.” — RICHARD COOK, FOUNDER AND CEO, BLACKFINCH GROUP