EIS Industry Report 2018/19

58 59 11. WHAT ARE YOUR TOP THREE CRITERIA WHEN SELECTING AN EIS INVESTMENT? Transparency of the underlying assets is the most important criteria for the advisers we surveyed. This will have become more pertinent, especially with managers who are pivoting into new investment areas where they may not have a track record. 13. TOP MANAGER RECOMMENDATIONS We asked advisers to give us their top three managers that they would recommend for EIS investment. Downing topped the list with 10% of the vote; however, none of the managers had a landslide victory, indicating that the EIS market is very competitive. What is interesting is that many advisers cited Octopus as a manager that they would recommend even though it has no open EIS offers. Time also narrowly missed the top 10 and, again, it doesn’t have an open EIS offer. This shows that their past performance (and the status of their other non-EIS offers) is continuing to cement a presence in the market. Advisers may be recommending legacy managers on the basis of an expectation of them relaunching EIS offers in the future. It will be encouraging for Octopus and Time to see this sentiment in the market, if they opt to relaunch an EIS offer in the future. 12. WILL THE INCREASED LIMITS FOR INVESTMENT IN KNOWLEDGE-INTENSIVE COMPANIES CHANGE HOW YOU APPROACH EIS INVESTMENTS? 80% of advisers said that the increased investment limits for KICs would not change their approach to EIS investments. Readers should note that the survey was compiled before the introduction of the knowledge- intensive fund structure in the 2018 Budget. However, it appears that the push towards KICs is making little difference to the advisory community ADVISER ROUNDTABLE HOW IS EIS FARING? Has the increased risk profile of EIS since the 2017 Budget changed your approach to investment? RM: It hasn’t at all. EIS has always been at the high end of the risk scale. We’d only present it to people prepared to take on that level of risk. If there’s ever a product where you could lose all your money, it’s this one. We were already using the at-risk models, as it matches up with what the tax relief was intended for. JM: The absence of asset backing has shifted the risk profile and made EIS suitable only for sophisticated investors. The change in risk profile has shifted investment into IT, healthcare and life sciences. This prompted me to take a 10-week course at Saïd Business School to improve my knowledge of Fintech and Regtech. MH: We’ve always viewed EIS as high risk. However, some of the planned exit strategies were perhaps lower risk, and we would have embraced some of those as a diversifier. A client who only wanted a low-risk strategy was probably too risk-averse to adopt EIS, and that’s why those offers were only a diversifier for investors willing to take on some risk. FHB: We have always looked first at the underlying investments, the tax benefits are secondary. The 2017 Budget undoubtedly increased the risk. Although I have no doubt that there are a few excellent EIS opportunities I have not been able to recommend EIS recently. The managers are failing to provide the necessary depth of research. ATTENDEES “EIS has always been at the high end of the risk scale. We’d only present it to people prepared to take on that level of risk.” — RICHARD MAJOR - LEGAL AND MEDICAL INVESTMENTS SIR FREDERICK HERVEY-BATHURST CLARENDON FINANCIAL PLANNING MARTIN HILL TWP WEALTH RICHARD MAJOR LEGAL AND MEDICAL INVESTMENTS JOHN MATHER MATHER FINANCIAL CONSULTANCY JOHN SCHAFFER INTELLIGENT PARTNERSHIP Moderator: John Schaffer, Intelligent Partnership Transparency of underlying assets Provider reputation Performance history Third-party reviews Prrvious experience with provider Platform availability Other 73% 71% 51% 50% 43% 5% 2% YES NO 20% 80% Downing 1 Deepbridge 2= Puma 2= Octopus (no open offer) 4 Guinness 5= Ingenious 5= Blackfinch 7= Foresight 7= Oxford Capital 9= Triple Point 9= Market Research / Adviser Survey Analysis