BR Report 2019

50 51 INDUSTRY DEBATE THE CURRENT LANDSCAPE What are your strategies to select and protect your BR investments against the impact of Brexit uncertainty and other geopolitical factors that may be bringing us closer to the end of the current economic cycle? AA: The Deepbridge IHT Service focuses solely on supporting renewable energy assets, a sector which continues to grow. For installations that are eligible for government subsidies, a large part of the revenue generated is index-linked and assets are also usually insured in order to mitigate against disruption to revenue, thereby offering subscribers a degree of protection from external disruption. JP: We follow stringent processes, focused on investing in well-run businesses with the ability to weather changes. For AIM-listed business we operate an exclusive partnership with Chelverton AM, drawing on its stock-picking expertise. As an EIS investor, while unlisted firms are less tied to economic shifts, we support them to exit. BT: Our BR strategies focus on leasing and lending to a wide range of the public sector, corporates and SMEs across the UK and in a broad spectrum of industries. The portfolios of the businesses are well diversified and liquid so could if necessary become more defensive. Our managers have successfully managed BR portfolios through several economic cycles and we believe that even in difficult times there is always a place for good lending to good businesses. LC: Our BR investments are in unquoted UK businesses and so aren’t directly correlated to stock markets or geopolitical factors. This means they tend to react to changes gradually rather than in sudden movements. To protect our investments, we work with experienced management teams, applying a rigorous due diligence process and ensuring there’s a market to exit the investment. SD: We have recently changed the return for TIME:Advance and TIME:CTC from 3.5% p.a. to a range of between 3% and 4.5% p.a. Both services are fundamentally capital preservation focused and this new range will allow us to continue to invest in lower risk/return assets and lower risk lending. ATTENDEES JERRY PRICE BLACKFINCH ANDREW ALDRIDGE DEEPBRIDGE LAURENCE CALLCUT DOWNING STEPHEN DANIELS TIME BELINDA THOMAS TRIPLE POINT Moderator: Lisa Best, Intelligent Partnership Have you noticed any hesitation among investors/ advisers to commit funds to BR in the current climate? BT: Yes, to an extent. We have fielded an increasing number of questions on the impact of a hard Brexit on our return profile, leading us to reiterate that we are providing funding to UK businesses, wholly in sterling and without the use of gearing. LC: Not really. Investors in BR funds usually approach it from an inheritance tax planning angle and understand that the services don’t behave in the same way as mainstream investments. For extra peace of mind, we offer automatic Downside Protection Insurance which covers any loss at death of up to 20% for investors up to the age of 90. SD: We’ve experienced steady inflows of capital and interest for BR investments remains very high. Growth in estate values continues to outpace the increase in the RNRB and other available reliefs. IHT is an ongoing issue and many advisers recognise that there is no benefit to delaying an investment, as this only delays the BR qualification. JP: We see investors proceeding with caution. It’s no surprise that the main issue giving investors concern over making an investment at the moment is Brexit. Furthermore, investors looking to utilise BR via AIM shares saw the FTSE AIM All-Share Index fall, in the last four months of 2018, by around 23%. AA: The process of the UK leaving the EU has led to investor uncertainty which has undoubtedly led to some investors delaying tax-planning and investment decisions. However, it should be noted that unquoted renewable energy investments are largely uncorrelated to stock markets and, with a reasonable degree of predictability of revenues, so this continues to be an appealing sector. Deepbridge’s fundraising continues to grow year on year, across all products, and therefore it is difficult to show any quantitative data around investor hesitation. Have you noticed any impacts from the tightening of rules in EIS/VCT - e.g availability of deals that would previously have been taken by capital preservation EIS/VCT managers? LC: The tightening of rules has unfortunately meant that some important businesses we’ve previously invested in, such as children’s nurseries and pubs, are no longer likely to be approved for EIS. However, they may still be viable areas for BR investment in which we have significant experience and potential deal flow. BT: No not really. Our focus remains on leasing and providing funding to the public sector, corporates and SMEs, areas which do not typically attract the VCT/ EIS tax reliefs, consequently the tightening of the rules have not impacted our deal flow. What we are seeing is demand for funding from businesses which is not being met adequately by the banks and hence a strong pipeline of opportunities for us to support UK growth. AA: With the Deepbridge IHT Service’s sole focus being on renewable energy assets, we have seen a positive impact on the availability of opportunities. A number of historic renewable energy EIS funds are seeking to sell assets in order to provide EIS investors with an exit. Therefore, there is a choice of energised “For installations that are eligible for government subsidies, a large part of the revenue generated is index-linked and assets are also usually insured in order to mitigate against disruption to revenue, thereby offering subscribers a degree of protection from external disruption.” — ANDREW ALDRIDGE, DEEPBRIDGE “IHT is an ongoing issue and many advisers recognise that there is no benefit to delaying an investment, as this only delays the BR qualification.” — STEPHEN DANIELS, TIME