Webinar discussion
Richard Angus looked at choosing a fund for Business Relief and the IHT planning market. For AIM portfolios, there are the same issues to consider as choosing a more conventional fund. Unquoted products require deeper analysis.
What is important is the philosophy of the fund manager, the areas of specialisation, the level of fees, amount of diversification, both across strategies and within strategies, and concentration of risk, and the experience of the manager in the sector.
Angus went on to talk about the valuation of private companies. This can be a challenging area because private companies are, by their very nature, illiquid and information may be somewhat limited. They are also often all regular seekers of additional capital.
Companies are typically valued at the price at the last fund raising round. That is all well and good in a buoyant market, when there is competition amongst informed investors. However, risks are typically high, too; fortunes can change quickly.
The best fund managers are those who cut their losses and continue to support the winners. If companies are not seeking new funding for growth on a fairly regular basis, there comes a time when you must question why.
Overall, it is important to understand what managers are doing to manage these valuations so that they are fair and transparent to all parties. There is little point in investing in good companies at inflated prices.
Brian Moretta then returned to talk about which solution was best for IHT planning. This can be complex, but he outlined three more straightforward options.
- If it is felt that the client was likely to live for 7 years or more, then gifts or trusts can be the ideal solution, though the latter is more complex.
- For investors who expect to live between 2 and 7 years the main option is to use Business Relief products. And here you have the choice of funds investing in the AIM market, or non-AIM Business Relief market.
- Business Relief can also be used as form of insurance for longer lived clients using the other options, giving a quicker exemption in case some dies sooner than expected.
The other key point made here is that an adviser should understand what the underlying investments are in the non-AIM BR market, with the majority of the funds investing in either energy or property lending. Hardman & Co offer a guide to help with this.
Finally, the Hardman team summarised what support they have available to help advisers and compliance managers in this growing market. As the investment case gets wider appreciation, demand from clients will grow. With taxes likely to rise following the pandemic too, tax-enhanced products are likely to be more valuable than ever.
As well as the reviews of fund managers, which are free from Hardman & Co for advisers, they also offer product selection panels, private company valuations, and special projects analysing investment risk.
Click here to watch the webinar recording
For more information about Hardman & Co, please click here
