The 2021/22 VCT season has started with a bang. Amati AIM VCT, the first to launch an offer in the current tax year, raised its £40m fundraising target in just four working days, making it possibly the quickest fund raise for a large VCT ever.
Amati AIM VCT launched its offer at 9am, on Friday 30 July. By 2.30pm on Wednesday 5 August, it had reached capacity, having raised £40m in just four working days. Of this, over £12.5m – a third of the total – was invested through Wealth Club, the UK’s largest non-advisory VCT broker. £4 million was raised in the first hour of the offer opening.
Alex Davies, CEO of Wealth Club, comments: “To raise £40m in just four working days is an outstanding achievement by all accounts and by far the quickest raise for any large VCT since we set up in 2016. To do so now – in the middle of the summer holidays and when people are finally allowed to go out and away for the first time in 18 months – makes it more impressive.”
“However, it is not that surprising. Investing in AIM is increasingly appealing – as is investing in VCTs. So, it’s easy to see why investors would flock to a VCT like Amati that focuses on AIM and comes with a very strong track record – it was the top-performing VCT over the past five and 10 years to June 2021.”
Why so much interest in AIM?
Alex Davies continues: “AIM as a whole is doing very well. It has weathered the Covid storm far better than the main market and has significantly outperformed it in the last year. Besides this outperformance, which of course is not guaranteed to continue, AIM is also increasingly becoming the go-to destination if you want fast-growing companies – especially in some of the economy’s best-performing sectors such as technology, which is woefully underrepresented on the main market.”
Is the Amati AIM VCT raise a one-off or are we in for a record year for VCTs?
Alex Davies comments: “Whilst the Amati raise has set records it is not a flash in the pan. VCTs are becoming increasingly mainstream and the drivers causing this are not going to go away.
“Firstly, the investment case is extremely appealing. Where once many VCT investments were in pretty turgid companies, thanks to rule changes a few years ago, VCT portfolios are now increasingly packed with fast-growing tech-enabled businesses (both AIM-quoted and unquoted) – many of which have seen their fortunes prosper during the pandemic and are exactly the type of company investors want in their portfolios.
“Secondly, fiscal pressure on wealthier investors is at levels not seen since the ‘70s. Restrictions on buy-to-let and pensions (the freeze in the lifetime allowance was the final nail in the coffin for many), combined with increased tax on dividends, mean it is now much harder for people to invest tax efficiently. VCTs, with up to 30% income tax relief and tax-free dividend plus a generous £200k allowance, are one of the last relatively simple and tax efficient investment options left. And if you are wary of potential tax increases on the way, then those tax benefits are all the more valuable.
“Serious investors looking for tax-efficient growth should certainly have a portion of their investment portfolios in VCTs.”
