Victrex Share Discussion Threads

[rambutan2] 16/4/2006 20:14

spin doc, i see that they have just raised £35m in a C share raising. which is about 3x the mkt cap of the original fund. do the new investment restrictions count with this money, and indeed with any new investments the old/recycled money makes? or do they just kick in with any vct money raised after the close of the 05/06 tax year?

on the face of it, under the new rules, size is perhaps going to be a bit of a hindrance i would have thought?

certainly wouldn't want to touch an aim vct under the new rules.

i've never been keen on vcts because of the lack of flexibility and the v high management charges, which are nothing short of scandalous. artifical investment products are never a good idea. especially once which are open to the whim of the treasury every year.

that said, a few of the vct managers have now been at it for a few years and im interested to see whether the likes of baronsmead, close and foresight have now got a structure in place which means that they can replicate and indeed improve upon past performance.

hmmm.

[spin doctor] 16/4/2006 15:02

Close have done it again:
Close Tech/Gen total return for calendar year '05 was >18%. Dividends now pretty certain to be >8p per year for the foreseeable future.

Interesting how some just churn out the results time after time, and others the absolute opposite.

[spin doctor] 03/4/2006 22:30

Whether an imvestment returns capital growth or income is of no great consequence to the investor, who must be interested only in the likely sum of returns, discounted as appropriate (ie distant returns are less valuable than shorter term ones). Earlier paid divis can always be reinvested.
I am therefore utterly uninterested in the quoted share price of VCTs, ( illiquid and discounted as they are), but am very interested in the future sum of tax free divis over the next 15-25 or so years.

VCT investments are often structured with a substantial loan (cf share) element, both to reduce risk, and to front-load investment returns.
Distributed income is therefore a mix of income (from cash, quoted share divis and loans) and capital (from realised equity stakes).
Exiting from equity stakes in unquoted businesses is clearly difficult, and may take many years (if achieved at all).

Paradoxically the Budget changes may make the industry more competitive and offer better value and returns to the punter.

[hazelton] 01/4/2006 13:51

Regarding the budget I think that the 5 years holding is fine but I do feel that some sort of 40% tax advantage is important. Either in part against income / capital gains deferral. In earlier posts I have expressed the opinion that VCTs are not a brilliant investment if you look at all of them over the last 10 years there are few that have made startling return. The more I think about it we have a vehicle tailored to return dividends (which is unusual) that are derived from stocks that do not normally pay dividends (usual for fast growing companies) so VCT distributions must be made from sales of holdings but selling (or buying) is not easy as they are fairly illiquid. I too can immagine the industries annoyance at seeing about half of their current cultivations and prospects of little use with monies raised in the future. Oddly if future demand is 100M / 200M then I suppose they can weather it as demand will not be there to make the problem more urgent. It is however a great shame to stop the expansion of the sector in this way as it is not that big yet. If the chancellor wants to make it harder for the VCTs to make an investment return then he should have put tax relief up not down. If they were not happy about some of the more opportunistic schemes then there must have been other ways.

[hazelton] 31/3/2006 07:52

david77 , again I just do not understand what the board of the VCT were doing as the investment sailed downwards over years. There are many examples of this. Currently AIM VCT 2 has raised only 1.7 M and many others seem to have a poor showing. I doubt that these groups will ever make any money in the VCT market and its a shame that investors have had such a bad time with them.

[spin doctor] 30/3/2006 21:02

Fees for AIM VCts are much higher than comparable non-VCT AIM funds.
And investments are very constrained.
They are the 2 key disadvantages.
Whether they are balanced by the tax perks is a moot point. I think usually not.
Interesting thought whether there is a case for mis-selling, esp to the mass market, where there is precious little emphasis put on the above factors, but many headlines focusing on tax perks and high growth AIM opportunities.

Neptune Calculus results out. Growth of NAV in a year from ~96 to ~108, mostly on the back of short-term investment in closed end funds.
Also another good return from Close Development, as expected. 5% tax free div and >5% NAV growth.

[david77] 29/3/2006 17:12

I went to the AIM VCT2 AGM today.

VCTs are limited to new shares in companies with assets under £15m - under £7m from next week. Range of companies very limited - tend to be very small and high risk - Egdon is the only resources company allowed whereas oil and minerals have been best performing sector of AIM over last year.

Management and directors' fees are the 'going rate'.

I will be selling on 6th April so delaying payment of deferred CGT another year and will not be buying any more VCTs.

[spin doctor] 28/3/2006 00:17

Fun and games. As stated above, this year's VCTs (and former) are unaffected by Gordon's shenanigans, ie 40% relief, £15M gross assets, 3 years hold to maintain tax perks.

Most of the AIM VCTs have been poor performers, and AIM VCT is no exception, and barely a glimmer of NAV increase this last 6 months despite general AIM bullishness.
AIM VCTs are definitely constrained cf. their non-VCT peers (see earlier posts, eg w.r.t. company size, sector etc), but clearly investment manager quality is to some extent responsible. Or maybe we as retail investors are being taken for a bit of a ride - ie we are often non-discriminating, especially when drawn in by a tax perk, so maybe obviously dull/high risk shares are loaded into VCTs whilst the more high performing gems go to non-VCT funds where poor performance would be rapidly penalised.
It would be interesting to ask F & C how they explain the 60% or so difference in performance 2001-2006 between AIM VCT2 and Active Capital - both AIM funds, both managed by them. Some of that will relate to greater distributed dividends by the VCT, but only a few pennies. Their top 10 holdings do not overlap at all.
Interesting that Baronsmead AIM VCT prospectus quoted a 7% p.a. return (after charges I think) on their AIM investments within their general VCTs. If that's the case that puts them right at the top; and seems quite acceptable to me given the limitations of VCT inv. Note that baronsmead delivered yet again last month with good NAv gains and distributions across the board.

[hazelton] 27/3/2006 13:43

david77 , I have just noted on the Bestinvest site that AIM VCT2 has 39.4M of funds to raise by next week with 600K raised already. A clear signal from investors.

[hazelton] 27/3/2006 13:33

As I understand it monies raised in this financial year will not be affected by this. I thought it a bit odd to reduce the tax benefit to less than it was some while ago and make the process even harder. Maybe there is a bigger picture.

[glynnef] 27/3/2006 09:32

Does anyone know how the budget changes affect existing VCTs in respect of the gross assets test ? I can't believe they will have to reorganise their portfolios and reinvest in smaller companies with gross assets of £8M maximum, but who knows with G Brown.

My only VCT holding is Invesco Perpetual AIM VCT, which has done well since I bought in FEb05.

regards,
GF.

[hazelton] 26/3/2006 23:58

Good , make them answer for it. I just do not understand why given all that money and time and expertise that the average performance of these young dynamic growing companies when incorperated into a VCT is very average. Some of the schemes are aweful with track records that are a disgrace.

[hazelton] 23/3/2006 07:04

It seems to me that Gordon has taken a lot away , halving the size of companies that are elegible will not help ?

They read to me to be less attractive than they were some years ago.

[spin doctor] 22/3/2006 17:01

Gordon B:
3.57 In Budget 2004 the Government introduced a two-year increase to the rate of income tax relief for investments in Venture Capital Trusts (VCTs). This provided the intended stimulus to VCT fundraising, which reached a record £520 million in 2004-05. The Government today announces a new 30 per cent rate of income tax relief for investments in VCTs from 6 April 2006. This is an increase from the original 20 per cent rate and will help ensure that the VCT industry has a solid foundation for stable fundraising and continued
growth.
3.58 This new rate of income tax relief is introduced as part of a package of changes to VCTs, the Enterprise Investment Scheme (EIS) and the Corporate Venturing Scheme. These changes will renew the schemes' focus on providing incentives for long-term investments in small companies facing the most severe barriers to accessing equity finance. These measures will be introduced from 6 April 2006 and include:
• a refocusing of the 'gross assets test' to £7 million immediately before
investment and £8 million afterwards, to focus on the companies most in
need of improved access to finance;
• in response to industry representations, an increase to the minimum holding
period for new shares in VCTs to five years to incentivise more stable, longerterm
investments; and
• a doubling of the annual EIS investment limit eligible for income tax relief to £400,000, to incentivise greater investment in growth companies.

[spin doctor] 17/3/2006 22:44

Budget next week, and at last news re: 06/07. V.poor show for HMG to have left it so late, for both investors and industry.
Assuming GB doesn't axe VCTs altogether, or radically change them (there seems no decent rationale for either), then:
Income tax relief will be cut no doubt, at least to 30%, maybe 20%
CGT relief may be introduced, but would surely introduce volatility in subs year-to-year : the problem that prompted the hike in income relief 2 years back. So I guess it won't happen.
IHT relief is also mooted, but I'm not sure GB will be happy with IHT avoidance. On the other hand, Bestinvest point out that it's a cheap (for HMG) way of incentivising investment (presumably because the costs are felt years down the line rather than immediately).
My betting is for 20 or 30% income tax relief plus some IHT relief somewhere. Bet I'm wrong.
Oh, and he should extend the period new shares have to be held, from 3 yrs to 5yrs. 3yrs with 40% relief was always a recipe for here today gone tomorrow investment, exactly what VCTs were supposed not to encourage.

[hazelton] 24/2/2006 23:45

Indeed , my sentiments also. I do hope that they do not let it go to their heads. Baronsmead 3 went pretty quickly too. I must suggest this to them, I have found Baronsmead to be pretty approachable.

I have some F3/F4 and Close Tech&Gen but from the performance tables I just cannot get keen on anyone else but there are enough players to have some stars there. Looking at the performance tables it seems easier to show a small loss rather than a gain.

I agree about the Baronsmead Aim , the next few weeks will be interesting.

Its odd , they are sold as high risk but I view them as buy and forget. If it was not for the tax perks they would usually be an aweful investment. Deriving income from an underlying class that traditionally pays little income and if it is high risk probably will grow at a pedestrian rate.

[spin doctor] 24/2/2006 23:02

Yep, amazing. Some people obviously have sense. I hope Baronsmead justify our and their confidence. I was looking at their prospectus last night, and they simply stick to their standard recipe time after time.

Other fast movers are Eclipse, Core, Downing Prot and Close IHT. The first has been heavily marketed but has minimal track record. The other three were pushed heavily on the basis of tax perks - IHT rollover or maximising early taxfree returns.

Close and Foresight are sluggish in comparison. Maybe they've wooed the IFAs rather less. My cheques have just gone off.

Baronsmead AIm just launched. Not tempted, but will be interesting to see (a) how quickly they fly off the shelves and (b) whether they can actually achieve reasonable performance. Hopefully this minor diversification won't result in them taking their eyes off the ball.

[hazelton] 24/2/2006 13:47

Baronsmead 4 all gone now - breathtaking.

[hazelton] 23/2/2006 13:37

If you look at how fast the current Baronsmead4 fundraising has gone then it must be on someones favorites list.

[david77] 23/2/2006 12:07

Anyone any idea why this doesn't come up on my 'favourites' list?

[spin doctor] 21/2/2006 21:47

Baronsmead, Northern, Electra and others diversify into AIM. Electra a bit less recently - "the market's overheated".
Foresight and Close tend to keep clear (except for Close AIM fund of course).

It may be that 20-30% of a fund is fine, as they can be more picky, and it may help spread risk; whereas having to invest £30M in a couple of years in a pure AIM fund is asking for trouble.

[hazelton] 21/2/2006 07:16

Indeed looked at like that it would cut the field down quite a bit. Many of the decent VCTs seem to have 40:60 AIM : private equity. I have started to wonder why. I had just looked at the AIM holdings as a way to control the 70% qualifying requirement. Its a shame that they do not decrease the proportion of AIM.

[spin doctor] 20/2/2006 23:29

Well, I'm no expert, and have generally kept clear of AIM, but...
(1) Investments must exclude financial, asset based, property devt, resources, etc. This excludes >50% by market cap of aim; and they have been the performing sectors in recent past.
(2) £15M max market cap; again excludes a significant part of the market
(3) can invest only in new shares
(4) have to be mainly uk operating
(5) enforced investment ie VCT must be 70% qualifying within 3 years
(6) constrained realisations, since need to maintain tax status (ie 70%)

There may be more constraints, but certainly managing them must give a real headache, and the proof of the pudding is in the eating - Trustnet notes average NAV gain of 1.8% the last year for AIM VCTs. Hopeless.