Electra Partners, the management company of the Electra Investment Trust and the Electra European Fund, has launched its debut Venture Capital Trust (VCT) offering, Electra Kingsway. The fund hopes to raise GBP25 million and Nick Ross, director of the VCT’s investment team, reported a good response in the VCT’s first week, particularly from Electra’s shareholders. The trust will invest in unquoted companies (approximately 70 per cent of the fund) and AIM listed companies (30 per cent). It will avoid high risk situations, such as start-ups, and focus on small companies that intend to float within three years or have a well developed strategy for growth and cash generation.
Since 1996, Electra has invested GBP29 million in 33 unquoted and AIM-listed companies of a similar size and type to those the VCT is likely to invest in. So far GBP39 million has been realised from these investments, with residual holdings valued at GBP18 million. The gross IRR generated was 28 per cent per annum. These commitments were mainly made by the Electra Investment Trust, which
has since changed investment strategy so investments made by the Electra VCT
will typically be outside the investment parameters of other Electra funds.
Ross said: “The launch of our VCT
will allow Electra Partners to take advantage of its very strong deal flow in this area. This is an exciting opportunity for the group and we look forward to expanding our business in this direction.” He added that Electra was keen to build up its presence in the smaller deal market to complement its European buyout activities. “We aim to advance the Electra brand in terms of both venture capital and other alternative quoted fund products. Going forward hedge funds would also fit well into this strategy.”
The fund is being promoted by Downing Corporate Finance, which has raised GBP150 million for 12 VCTs to date. Nick Lewis, director of Downing, said: “Electra Partners is an established and successful name which, with the launch of this VCT, is now enabling retail investors to access their investment expertise in unquoted companies. We believe VCT investors will recognise that the current market conditions, notwithstanding recent events, provide an excellent investment opportunity for long-term capital appreciation.”
Ross echoed this sentiment. He said: “We hope to have closed the fund by the end of the year and when we start investing in January or February we expect investment conditions to be very attractive for the long-term prospects of the fund.”