In the next instalment in our series of exclusive interviews with industry experts, Stuart Mant, Head of Business Development at Albion Capital, provides his insight on the biggest growth opportunities and most common risks for investors, and discusses his company’s approach to investing.
1.) What tax-efficient schemes does your company work with, and how do you offer a unique/compelling approach for advisers?
Albion Capital is a leading independent venture capital manager with over £1bn AUM, £645m of which is across the six Venture Capital Trusts (VCTs). Having managed VCTs for over 27 years across various economic cycles, advisers and their clients can expect a trusted manager who has the knowhow to navigate difficult markets.
As thematic investors, we specialise in B2B software and healthcare with deep domain expertise to match. By focusing on B2B businesses providing mission critical products and services, advisers can tap into a suite of VCTs anchored around long-term trends that we believe will drive enduring value and designed to provide diversification and resilience.
Manager experience is a key consideration for advisers and the experience of Albion’s team is a real differentiator. Our 26 strong investment team have varied backgrounds across finance, medicine and startups. These key skills are not only vital to evaluating the businesses we invest in but allow us to offer valuable strategic support to help them scale, which in turn drives our VCTs’ returns. We also have a very stable investment team and 73% of our partners have been with Albion for over ten years. This is important when investing in smaller unquoted businesses with a long horizon as it gives consistency to the founders that we back and forges long term-partnerships.
In essence, what we offer advisers is a suite of VCTs that are built to exploit long-term trends, offers diversification benefits, and targets a blend of consistent income and capital growth potential. Across the six VCTs the average annualised total return over 10 years has been 7.1% p.a., well above the 5% p.a. dividend yield target and excludes tax reliefs. Past performance is however not indicative of future returns.
2.) How active are you in providing education to advisers on the types of clients that are suitable for these types of investments, as well as any changes in regulation or nuances in the existing rules?’
We work closely with the adviser community and have a dedicated sales team to offer support and guidance. We engage with advisers throughout the year to discuss any new VCT offers, provide general portfolio updates and go through planning scenarios. Moreover, we run a number of educational adviser events.
This includes the ‘Access to Innovation’ event where advisers can invite their clients to hear from the founders of some of our most exciting portfolio companies. We also have two webinars, the ‘Macro Outlook and Key Venture Capital Themes’ webinar allows our partners to update advisers on macro events, the venture capital landscape and our VCTs. The ‘Promoting Female Wealth Through Venture Capital’ webinar will explore the themes and opportunities for more females to diversify away from traditional asset classes and discover the merits of venture capital, an area where historically they have been underrepresented.
3.) Where and in which types of companies are you seeing the biggest growth opportunities?
Albion targets UK smaller companies that we feel have reached an inflection point and require additional capital and scale up expertise to accelerate growth. There are four verticals where we are seeing the most interesting growth opportunities:
1. AI & Data stack – The quantity and value of data is exploding, leading to rapid advances in analytics such as AI as well as enterprise digital infrastructure.
2. Digital Risk – As the digital economy grows so does the regulatory environment and the threat from hostile actors.
3. FinTech – The continued digitisation of financial services is driving opportunities to build more efficient offerings.
4. HealthTech – A large market with strong long-term growth fundamentals. Significant acceleration of technology adoption because of Covid-19.
4.) What do you see as the biggest risks for investors?
A key attraction with VCT investing is the tax benefits it brings (subject to the investors personal tax position). The biggest risk is therefore any legislative changes that would remove such benefits. The sunset clause, which would have put an end to some of these tax benefits after 2025, was extended to April 2035 in the Autumn Statement. The Labour Party is also voicing support for the scheme which is encouraging should Labour come into government.
5.) Should advisers be worried about a lack of diversification, and why?
Diversification is an integral risk mitigation tool that advisers rely on to help protect their clients’ wealth and that is no different when investing in VCTs.
Advisers should therefore advise their clients to diversify their VCT investment across a number of VCTs and VCT managers. Researching the VCT market is central to identifying a balanced portfolio of VCTs.
Our suite of VCTs give exposure to around 65 businesses and are further diversified by target sectors and by stage of business maturity.
