BR Report 2019

52 53 assets, often with a number of years of index-linked government subsidies remaining, from which our trading companies may select the best-performing assets which are projected to exceed our 6% target return per annum. SD: Our core sectors of lending and energy infrastructure have been excluded from EIS/VCT for a number of years. We have recently acquired a storage development project, which would have historically received EIS/VCT funding. EIS/VCT projects usually carry a higher level of risk that would ordinarily be unacceptable to an IHT investor. JP: The space in which we operate BR is very different even to the previous capital preservation EIS space and so the tightening of these rules has not had a positive or negative effect on our deal flow. However, there will be companies out there looking for alternative funding which may be possible through our lending activity and we could see more demand in the future. The AIM market has suffered volatility and downward pressure on valuations in the last six months. How do you see the outlook for AIM-focused BR products? SD: We have seen continued investor interest, predominately due to ISA availability. AIM companies are UK-based and therefore have high exposure to the UK economy and Brexit uncertainty. Our portfolio focuses on mitigating volatility using our innovative smart passive approach. LC: To avoid overstretched valuations, we invest in AIM BR-qualifying businesses that generally have a smaller market cap than the more popular AIM BR holdings. However, the fund isn’t entirely immune and will still be impacted by movement in the AIM market. We offer Downside Protection Insurance that covers any loss at death of up to 20% for investors up to the age of 90, giving AIM investors extra peace of mind. JP: Despite market upheavals, we remain broadly positive on the outlook. However, regardless of IHT planning, and in line with our risk warnings, any AIM portfolio should be viewed as a medium to long-term investment. Ensuring good value and diversification in the portfolio is key, while avoiding overpriced larger cap stocks. BT: We do not offer an AIM product. AA: Neither do we. Are there any trends that you have noticed in the BR market in the last year that have concerned or excited you and what do you see in the next year for BR? JP: We have noticed an increase in professional connections such as solicitors and accountants seeing the value and flexibility of IHT planning using BR. In addition, in launching Blackfinch Wealth, which provides an investment solution within the mainstream space, we have identified an increase in advisers new to tax planning. “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.” — BELINDA THOMAS, TRIPLE POINT “To avoid overstretched valuations, we invest in AIM BR-qualifying businesses that generally have a smaller market cap than the more popular AIM BR holdings.” — LAURENCE CALLCUT, DOWNING “We have noticed an increase in professional connections such as solicitors and accountants seeing the value and flexibility of IHT planning using BR.” — JERRY PRICE, BLACKFINCH BT: Advisers are becoming increasingly knowledgeable about the underlying holdings within products and how they work together. We believe that this should be favourable for services that invest in well run, transparent businesses such as NTL and TP Leasing Ltd. LC: There’s a proliferation of new providers looking to get a share of the same market. These tend to be small funds, which causes concern around diversification. If a fund is small, an investment or small number of investments failing could have a significant impact. We believe the market is entering a mature phase - the gold rush is over and some serious mining is now required. SD: The level of due diligence conducted by advisers to research product providers has increased over the year, aided by independent reviewers that have helped improve the transparency of the BR industry. This is positive news and it’s important that advisers get the support they need from providers to fully review the BR solutions available. The need for transparency in BR has never been greater; for example the increased use of gearing across the BR market is concerning and not well understood. This is something to watch this year. AA: We have anecdotally noticed that advisers are increasingly interested in the renewable energy sector as an asset-backed, often index-linked, opportunity targeting not-insignificant growth potential. For those advisers who have historically invested in renewable energy projects via EIS then it is an asset class they are comfortable with and appreciate how it can be appealing. Moderator: Lisa Best, Intelligent Partnership Market research / Industry roundtable