A second tranche of the Downing EIS fund has been launched. Downing plans to raise a maximum of £15m.
The Downing EIS Tranche 2 offer is open now and closes on 28 February, 2017. The target return for every 70 pence invested is £1.10 (after 30% income tax relief). The target exit date is 2021.
Downing said that Tranche 2 is an opportunity for investors seeking a capital preservation strategy with the benefit of attractive tax reliefs.
A portfolio of around four to six companies will be built, with management teams chosen for their ability and expertise. The idea is to reduce the effect of underperformance, or failure by an individual company within the portfolio, compared to single-company EIS offers. A number of sectors will be targeted, including pubs, wedding venues, care homes, children’s nurseries and data centres.
CEO of Downing Tony McGing (pictured above) said: “We are delighted to bring this £15 million tranche to the market as the number of open offers has reduced, mainly due to the tightening of rules around qualifying requirements for EIS companies. Increasing limitations to annual and lifetime pension contributions mean EIS offer an attractive proposition providing upfront tax relief, IHT relief and tax-free capital gains. This is an attractive opportunity at a time when demand for EIS has increased as investors look to generate an alternative source of income and, or supplement existing retirement plans.
“EIS can be a valuable financial planning tool and as experienced investors in pubs, care-homes, nurseries and data centres, the underlying fundamentals combined with inherent asset-backing offer significant appeal.”
It is no longer possible to invest in trading businesses, after new regulations governing EIS introduced in November have restricted the type of businesses EIS companies are able to invest in, but it is permitted to acquire closed premises, renovate and re-open as a new business.
Downing said it intends to focus on businesses seeking to trade from freehold, or long-leasehold premises, which can provide good growth potential at the same time as helping to reduce the risks.
In a statement issued today, the firm said: “As well as selecting some of the best operators to work with, Downing seeks the best possible price on exit. The managers’ interests are aligned as performance fees are based on cash proceeds paid to investors in excess of the initial 100p invested.”
