By almost any measure 2021/22 will be a record breaking VCT season, eclipsing the previous record set in the pre-pandemic world of 2018/19, and clearly demonstrating for the first time that the VCT market is Coming of Age as explored in our previous newsletter. However, it has perhaps been the speed of some of the fund raising rather than the overall amount that is most significant this quarter, and that has continued apace in the last couple of weeks, with the popular Mobeus VCTs filling up a £38M raise in under 24 hours, and the vast majority went in a single afternoon.
After some fairly speedy fund raising last year, the Amati AIM VCT raise in July, not traditionally a month renowned for VCTs, was the first indication that the market appetite for the right VCTs was in place. This was confirmed with a series of large raises by Octopus Asset Management, filling up the £200M Titan in only a few weeks, with the AIM VCTs, Apollo, and the launch of the new Future Generations VCT taking the giant of the VCT world to over £300M in total this tax year alone. Further launches from Albion, Northern, Baronsmead, Smaller British Companies and Hargreave Hale have all reached, or will reach capacity very shortly, as will Pembroke, Proven and Maven amongst others. As discussed, the lightning-fast Mobeus raise took this to a different level.
Market Drivers
There are a number of drivers for this, as discussed in the previous quarter.
- Clients who have reached their pension Life Time Allowance
- Attractiveness and reliability of regular tax free dividends
- Longer term investment track record for many of the managers given the much greater stability in the market over the last 10 years.
- Traditional 30% income tax break.
We are hoping that by next year, the increased liquidity of VCTs in the secondary market will be a positive driver as well, and is something we are working closely on with a number of partners, but it is clear that there is good momentum in the market and the news about VCTs is spreading amongst both investors and advisers.
Technology Driving Change
Behind the scenes there are a number of technological and attitudinal changes which are allowing this to happen: Alongside the basics of digital signatures, which quickly became commonplace in the opening weeks of the pandemic, there has been a greater wilingness from all parties to make the necessary changes, whether legal or operational, to allow clients greater flexibility and choice in the way that they invest into VCTs. The laggards cannot get left behind, as too much flow is now coming through platforms, whether direct to consumer such as Wealth Club, or more adviser-focused such as ourselves.,
Key cogs in the VCT machine are the receiving agents, and registrars, who are now starting to take good steps towards a more efficient technological set up and much better integration with key partners. For example, we have been able to offer a digital application service across the entire VCT market, and for more than half of the VCT new offers this season, we have been able to integrate at a deeper level with the relevant receiving agent, allowing us to submit multiple applications at the touch of a button, and receive confirmations of acceptance in just seconds. The reassurance that this can provide to advisers and their clients when popular offers are going in just a few hours is incredibly important, and removes a huge amount of the previous uncertainty. The benefits of closer integration extends beyond the initial application, through to immediate allotment, centralised dividends, and digital tax certificates all flowing through to the platform client account.
One of the companies at the forefront of driving this change in the market is City Partnership, who we have been working closely with over the last few months
Our Chief Technology Officer Aled Treharne said:
“I was delighted to meet Rudi and the team at City Partnership. Like us, City Partnership have a passion for, and a comprehensive understanding of the benefits that automation and technology can bring the market. Not only that but they were able to execute on that vision and, working alongside our technical team, delivered a resilient and highly efficient solution for the fully automated transfer of data in just a few days. This automated transfer of data gives GrowthInvest clients and advisers the best possible chance of getting access into these popular products. Our partnership continues to grow, and this technology-based approach allows us to add new products to the system in a matter of hours”.
A Bespoke Service
However, it is important to note that the technology is only one important part of the story, and the clear and regular communications have helped to ensure that advisers are in communication with their clients well before the deadline, and that they get their VCT choices and funds in place well in advance of the starting gun. Alongside our platform Investment offers, where our clients can always find the very latest, our regular weekly email Market Download, provides all the latest news, events, webinars raise amounts/capacity and what’s coming soon. This is across the whole tax efficient arena. Our award-winning Adviser Hour series usually include a high quality VCT episode and the one last week featuring the AIC, Unicorn, Albion and Seneca was no exception, and helps Advisers to get quickly up to speed with the latest trends.
Underpinning all of this is our direct communication with Advisers, a service that includes prompts and reminders about a client’s previous investments, their expression of interest, or any known areas of interest.
Melissa Griffiths our Head of Sales sums it up:
“We understand that advisers and their clients are incredibly busy, and it is all too easy for a deadline to be missed as VCTs come to the market and fill up very rapidly. By getting to know our adviser clients, we can offer a personalised service which includes alerts and reminders about forthcoming deadlines, what actions need to be taken, and by when. We talk to advisers at the start of the VCT season, and continue to work and communicate with them throughout”
We look forward to the next few weeks, and to the continued growth of the VCT market.
Additional VCT Content:
- Watch the Interview: Nick Britton, The AIC
- Watch the Show: Adviser Hour – VCTs The Biggest Season to Date
