The Octopus Titan VCT opened today seeking to raise up to £250 million (£175 million + £75 million over allotment), the largest ever fundraising target of any VCT. Last year, it raised £200 million in a record four weeks. With net assets of £1.2 billion not only is Octopus Titan the largest VCT but also one of Europe’s largest Venture Capital funds.
It’s currently invested in 117 companies, including some of the UK’s fastest growing technology businesses such as pet insurer, Many Pets, British satellite launch company Orbital Express Launch, and digital clinic for substance addiction, Quit Genius. Investors can apply online through the Wealth Club website and get a better deal than going direct or through an adviser.
Commenting on the launch, Alex Davies, CEO and founder of Wealth Club, the largest broker of VCTs, says:
“At £1.2 billion of assets, Titan is the largest and one of the most exciting VCTs open to investors. It’s done exactly what VCTs are supposed to do: pump vast amounts of money into promising UK start-ups to help them grow. And that approach has paid off in spades for everyone involved. Companies such as Zoopla, the first VCT-backed company to reach a £1 billion valuation, Depop, the vintage fashion app which sold for $1.6 billion dollars and Many Pets, the pet insurer, currently valued at $2 billion – all got backing from Octopus Titan.
Investors have been handsomely rewarded too: over the past 10 years Octopus Titan has generated NAV total returns of 152%. That means a £2.52 return for every £1 invested.
And the economy as a whole has benefitted too. In the last year alone, companies backed by Octopus Titan created more than 350 new jobs and generated an extra £493 million of revenue. Encouragingly, 37% of the new investments also have a co-founder from an ethnic minority background.
Whether you’re a seasoned VCT investor or someone dipping their toes into VCTs for the first time, investing with a well-known name with a strong track record like Octopus could be a compelling option. This latest fundraise gives investors the opportunity to support some of the UK’s fastest growing companies, and in doing so benefit from a number of attractive tax incentives, including 30% upfront tax relief, tax-free dividends and tax-free growth.”
On the general VCT landscape, Alex Davies adds:
Despite the gloomy economic backdrop, demand for VCTs remains buoyant. With expected freezes to the pension allowances in next week’s Autumn Statement and the threat of even higher taxes, we expect demand this year to continue unabated. Afterall, for wealthier investors VCTs are one of the last sensible tax efficient investments left.”
Last year Octopus Titan sold out its full £200 million offer in just 28 days, so we would urge interested investors to act promptly or risk missing out.
Why invest in VCTs?
- Firstly, VCTs provide a valuable tax efficient investment tool for wealthier investors affected by the pension restrictions.
- Since 2009 successive governments have been restricting the amount wealthier individuals can put in a pension to raise extra tax revenues. 13 years ago, a high earner could invest up to £255,000 per tax year in a pension and get a significant percentage of that back in tax relief. Those days are gone. Now the annual pension allowance is £40,000 – reduced to as little as £4,000 for some top earners. Meanwhile, the pension lifetime allowance – the total most people can put aside tax efficiently in a pension over a lifetime – stands at £1,073,100 down from £1,750,000 in 2009.
- With their simple annual allowance of £200,000 and generous tax breaks of 30% income tax relief and tax-free returns, VCTs have become the next port of call for those looking to invest for their future as tax efficiently as they can.
- But it is not just about the tax relief. Investors are increasingly realising that growth and innovation are not likely to come from the large corporates you find on the main stock market, but rather from young, ambitious, and entrepreneurial start-ups. Not all will succeed but there’s now much more support compared to, say, 10 years ago – from incubators and accelerators to public and private funding – so they should have a better chance.
- Moreover, over the last ten years VCTs have performed well with the 10 largest generalist VCT managers having on average more than doubled investors’ money (in terms of NAV total return), outperforming the FTSE All Share index. And that is before taking into account tax relief, which enhances effective investor returns considerably.