Downing has partnered with the life science group BioScience Managers, to offer a new Healthcare share class to VCT investors.
The new share class, which will be added to the Downing FOUR VCT, is targeting to raise up to £10m and for the first time it will allows investors to make monthly contributions, which will be allocated quarterly.
At the same time Downing FOUR is looking to raise up to £20m in a new Generalist share class, which like the new healthcare share class, will pursue ‘evergreen’ as opposed to ‘planned exit’ strategies.
Evergreen VCTs have no fixed life and investors seeking to exit sell their shares, often at a discount to net asset value (NAV) of between 5%-20%, effectively pay a penalty on exit. Downing intends to buy-back shares at a nil discount to its latest NAV thus giving shareholders the opportunity to exit Downing FOUR in one transaction, at a time that suits them, with no exit fees.
The Healthcare and Generalist Share Classes will target dividends of at least 4% per year from the fourth year onwards. This equates to a tax-free yield of 5.7% on the current offer price net of 30% income tax relief.
Jeremy Curnock Cook, the managing director of BioScience, will be part of the investment team selecting companies for the healthcare portfolio. He has over 30 years experience in the sector, having formally been the investment manager of the Rothschild-managed Biotech Investment Ltd investment company.
“VCT structures are an ideal way to get access to small specialist companies operating in our key focus areas,” says Crock Cook. “They provide a portfolio of companies that can yield significant returns through a vehicle that is much more secure than making a direct investment.
“Importantly, VCTs can facilitate the development of technology to a point where thy are recognised by the major players, therefore providing the opportunity for both consolidation and exit.”
Downing CEO Tony McGing adds: “The new Healthcare share class offers VCT investors the opportunity to gain exposure to this specialist sector through an experienced team of experts who have a good track record.”
He added the launch is significant given that tightening legislation has restricted the pool of combines qualifying as VCT investments and a number of leading providers will raise ess money than in previous years.
“The sector has capacity for growth against a backdrop of an ageing population and increasing global expenditure on healthcare, with spending expected to increase from an estimated $7.2trn in 2013 to $9.3trn in 2018.”
Commenting on the two share offers, Wealthclub’s investment director Ben Yearsley says: “The new offers will increase the size of Downing FOUR and therefore spread the running costs over a greater asset base, an obvious positive for shareholders. High demand and lack of supply suggest Downing’s proposition is likely to be welcomed by a market that has seen a marked reduction in the number of VCTs raising funds.”