The majority of IFAs (58%) believe generalist VCTs, investing in both AIM and unquoted companies, will be the most popular type of VCTs amongst their clients this tax year, according to a new survey by Noble.
The anticipated growth in popularity of generalist VCTs comes at the expense of AIM-only VCTs. Only one third (36%) of intermediaries selected AIM VCTs as the most popular compared with half (50%) last tax year. Investor enthusiasm for specialist unquoted-only funds is also expected to drop with only 6% favouring this type of VCT ahead of the other classes of VCT, down from 10% in the 2004/5 tax year.
Performance data from Allenbridge reveals VCT performance with no tax breaks shows mostly negative returns as do the indexes for most periods. The data also reveals VCTs with 20% income tax break (which should apply to nearly all investors) are mostly better or close to the FTSE all share and always better than AIM except for the funds launched in 02/03 and from then on, which are too recent to give meaningful returns.
Henry Chaplin, chief executive of Noble Fund Managers, says: “We are delighted that the bulk of IFA sentiment is behind generalist VCTs and believe that this follows through in their advice to clients. Generalist VCTs investing in both AIM and unquoted companies create a balanced portfolio that can be managed in order to minimise the impact of downward fluctuations in the AIM market. From a risk management perspective, investing in a mature generalist VCT that is well diversified by the number of companies it has invested in as well as the sectors it covers, in both AIM and the unquoted market presents the strongest opportunity.”