With the risk-free rate having risen dramatically, the return target from assets capable of generating inflation-beating returns, is in the high-risk territory. And this is coming at a time where under Consumer Duty, we’re thinking more than ever about the value of advice.
Investments could need to target 8% or more annually to achieve better-than-cash returns after the impact of advice fees.
So why do VCTs warrant special attention?
To achieve these returns, advisers might be contemplating the inclusion of higher-risk investments for a larger proportion of their clients. The degree of research required to recommend these investments certainly merits the time taken to consider and advise on them.
Against this backdrop, venture capital trusts (VCTs) stand out as particularly noteworthy this year. The UK government’s recent announcement during the Autumn Statement that the existing sunset clause for VCTs will be extended by a decade to 6 April 2035 adds an extra layer of certainty, a development welcomed by the wider industry. VCTs have experienced a surge in popularity, and this trend is likely to persist, as VCTs offer the opportunity to leverage tax reliefs, potentially offsetting the increased investment risk undertaken by investors.