According to a survey of 154 leading investment IFAs by data solutions company, Matrix-Data, VCTs will still struggle to raise funds over £300m this year despite the introduction of tax relief at 40%.
Independent financial advisor Allenbridge data reveals that only £114.6m has been raised against the £800m target of the trusts launched to date. “Although 90% of IFAs surveyed thought the market would be bigger next year, the inescapable conclusion is that many VCTs will be under-subscribed by April 2005,” says David Lovell, account director at Matrix-Data.
The majority of IFAs also said they are likely to select no more that five managers to recommend to their clients. They are concerned about quality over quantity with too many VCTs chasing too few investment opportunities. “Hopefully investors won’t be encouraged to invest in companies jumping on the bandwagon with no track record in managing much smaller companies,” says Alan Cotton of Park Row.
What is clear is that the winners will be those VCT sponsors that get their marketing and distribution right. The successful vehicles must build up a critical mass of funds raised in relation to their rivals. It appears that the trusts that have raised most to date have been most active with their advertising and direct marketing.