Contents
Northern VCTs fundraise
We’re pleased to announce that the three Northern VCTs (Northern Venture Trust PLC, Northern 2 VCT PLC and Northern 3 VCT PLC) are seeking to raise up to £36 million, with £15 million available for subscription in each of Northern Venture Trust PLC and Northern 2 VCT PLC, and £6 million available for subscription for Northern 3 VCT PLC.
Hugo Lough speaks to Wealth Club
Recorded November 2024 with Wealth Club.
Wealth Club talks to Investment Director Hugo Lough of Mercia Ventures, the manager of the Northern VCTs (Venture Capital Trusts), to learn more about their portfolio, their recent investments, their investment approach, and the challenges and opportunities in the current economic climate.
Why VCTs?
Mercia’s Northern VCT Funds, launched in 1995, are a tax efficient fund with a target annual tax-free dividend of between 4.5% and 5%.
“Using an industry standard procedure and well-justified assumptions, we have shown that venture capital is a compelling addition to investor portfolios. Even at a relatively small proportion of portfolios, it can make a significant difference. The addition of tax reliefs make it even more compelling.”
Investing into VCTs provides investors with exposure to high-growth private companies, which can increase the overall risk and return profile of the investment portfolio as evidenced by Dr Brian Moretta of Hardman & Co.
Tax relief to encourage the support of higher-risk SMEs
UK taxpayers who invest in VCT can claim income tax relief of 30% of the amount invested and receive ongoing tax-free dividends. The government provide these tax reliefs to encourage people to support higher risk smaller businesses, which are important to expanding the UK economy.
Tax reliefs and tax-free dividends can be complimentary to an investors long-term investment plans. As the nature of all early-stage investments means that there is a higher risk of failure, they may offer higher rewards – for those seeking a high-risk, high-reward profile. Despite the tax-free dividends and comparatively low minimum investment, VCTs are not for everyone, as the underlying assets in the portfolio carry a higher risk as the companies in which they invest are early-stage businesses.
Tax treatment depends on the individual circumstances of each client and may be subject to change in the future.
Portfolio spotlight: Promethean Particles
Investment Manager Dr Marina Fuentes sits down with CEO of Promethean Particles, James Stephenson, to talk through its MOFs technology, the potential of MOFs in energy transition applications and Mercia Ventures latest Series A investment.
Stimulating a wider economy
Through our Northern VCT funds, Mercia can provide an investment opportunity with exposure to innovative, small companies. Led by highly ambitious management teams, this VCT portfolio has the potential to generate significant value for our VCT shareholders. These portfolio companies are also helping to stimulate the wider UK economy along the way, which satisfies investors seeking responsible investment strategies
Gentronix exit
Northern VCT-backed, Gentronix – the UK-based contract research organisation (CRO) that is a world leader in genetic toxicology – has been acquired by Scantox Group of Denmark for an undisclosed sum.
Fund investment
What do the funds invest in?
Mercia’s Northern VCT funds invest across a range of innovative sectors from Life Science through to Software and Consumer, providing investors access to unique opportunities. As the nature of all early-stage investments means that there is a higher risk of failure and potential loss of capital, but they may offer higher rewards.
Subscription limits
You can invest up to £200,000 into VCT funds in any tax year. The Northern VCT Funds which Mercia manages has a minimum £6,000 investment level.
What are the risks?
VCTs are not for everyone. As the nature of all early-stage investments means that there is a higher risk of failure and potential loss of capital, but they may offer higher rewards. It is important that you carefully research the opportunities and seek professional advice from a properly regulated entity or professional.
Why Mercia?
Mercia’s investment team has an established track record delivering returns for shareholders across both private and public sector mandates. Over the years the VCT team has started to build an enviable track record making it one of the most promising VCT teams in the country.
“This is reinforced by the fact that this strong performance comes principally from exits as well as unrealised NAV growth. The average uplift ratio is 2.28x (5-year Exit Multiple / 5-year Unrealised Multiple); where a ratio of above 1.00 means the VCT’s exit performance has been stronger than its unrealised performance.”
MJ Hudson, September 2023