EIS 2018 report (web)

60 61 UK MARKET OVERVIEW OFFERS LAUNCHED IN 2017/18 This section focuses on all 2017/18 EIS offers (i.e. launched anytime from 1 April 2017) and draws some conclusions from the differences observed from historical offers (any offer launched before that date). The key metrics we analyse give advisers an indication of what to expect when looking at EIS offers. The analysis is based on data supplied by the MICAP platform and is correct as of mid-January 2018. The data shows 26 offers which opened between April 2017 and mid-January 2017, and 214 which opened prior to that period, giving an overall total of 240. INITIAL CHARGES This initial fees analysis supports our assertion in the Sector Data Analysis earlier in this report that initial fees are going up. This analysis, based on MICAP data of mid January 2018, versus the Sector Analysis data of late December 2017, shows that, even in that short period, there was upward movement. When reviewing historic data from the start of MICAP EIS listings, this trend is clear. The longer term trend of investee fees rising while investor fees fall is also demonstrated. 2017/18 OFFERS AVERAGE MODE MINIMUM MEDIAN MAXIMUM CHARGED TO INVESTOR 1.32% 0.00% 0.00% 0.00% 5.00% CHARGED TO INVESTEE 2.23% 0.00% 0.00% 2.50% 5.00% TOTAL INITIAL CHARGE 3.55% 5.00% 0.00% 3.50% 7.50% HISTORICAL OFFERS AVERAGE MODE MINIMUM MEDIAN MAXIMUM CHARGED TO INVESTOR 1.52% 0.00% 0.00% 1.00% 7.50% CHARGED TO INVESTEE 1.13% 0.00% 0.00% 0.00% 10.00% TOTAL INITIAL CHARGE 2.63% 0.00% 0.00% 2.50% 10.00% TOTAL INITIAL CHARGE OF 2017/18 OFFERS AVG MODE MIN MEDIAN MAX 8% 7% 6% 5% 4% 3% 2% 1% 0% INITIAL CHARGE OF HISTORICAL OFFERS CHARGED TO INVESTEE CO AVG MODE MIN MEDIAN MAX 12% 10% 8% 6% 4% 2% 0% ANNUAL MANAGEMENT CHARGES PERFORMANCE FEE Exit performance fee 2017/18 Offers Exit performance hurdle 2017/18 Offers The overall AMC has remained stable in terms of 2017/18 offers versus historic offers, although, more often than not, it has not been charged. Where it has been charged, its composition mirrors the general phenomenon for the portion charged to the investee going up, and the portion charged to the investor going down. 2017/18 OFFERS AVERAGE MODE MINIMUM MEDIAN MAXIMUM CHARGED TO INVESTOR 0.25% 0.00% 0.00% 0.00% 2.00% CHARGED TO INVESTEE 0.82% 0.00% 0.00% 1.00% 2.25% TOTAL AMC 1.07% 0.00% 0.00% 1.25% 2.55% HISTORICAL OFFERS AVERAGE MODE MINIMUM MEDIAN MAXIMUM CHARGED TO INVESTOR 0.71% 0.00% 0.00% 0.00% 2.50% CHARGED TO INVESTEE 0.36% 0.00% 0.00% 0.00% 4.00% TOTAL AMC 1.05% 0.00% 0.00% 1.50% 4.00% TOTAL ANNUAL MANAGEMENT CHARGE TOTAL AMC OF 2017/18 OFFERS TOTAL AMC HISTORICAL OFFERS “The overall AMC has remained stable in terms of 2017/18 offers versus historic offers.” This is one of those fees which tends to be stable, with the mode again at 20% and little change in the average since last year at just under 20%. However, if we remove the four offerings that do not charge a performance fee at all, the average is just under 23%. We can also see that 11 offers charge 20% but 10 charge 25%. Last year, over twice as many offers charged 20% versus 25%, suggesting that the most common exit performance fee could be at 25% for next year offers. This fits with a market more focused on growth. The most commonly quoted exit performance hurdle for 2017/18 offers is the same as the historical rate; 100%. Unlike exit performance fees, this appears to continue to reflect a market where capital preservation plus the tax reliefs are deemed sufficient. AVERAGE MODE MINIMUM MEDIAN MAXIMUM 5% 4% 3% 2% 1% 0% 40% 30% 20% 10% 0% AVG MODE MIN MEDIAN MAX 200% 150% 100% 50% 0% AVG MODE MIN MEDIAN MAX