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Fund of the Fortnight: British Smaller Companies VCT

Written by: Sophie Muller, research analyst at Tilney Bestinvest
Venture Capital Trusts (VCTs) are currently seeking a significant amount of fresh investment from long-term investors comfortable with higher risk investments.

However, given the current pace of fund raising, it is expected that the most popular will be closed before tax-year end as significant reductions in both annual and lifetime personal allowances, together with investors’ on-going search for yield has meant demand has surged.

YFM Equity Partners have currently raised over half of their £30 million target across their two VCTs: British Smaller Companies VCT & VCT 2. This offer gives investors the opportunity to gain immediate exposure to established and mature portfolios, investing predominantly in unquoted growing companies across a broad range of sectors, funding management- buy-outs and growth capital opportunities. The focus is on companies worth £5-15 million, with profits of between £0.5 million and £3 million.

A key differentiator of the British Smaller Companies VCTs is their focus on opportunities in the UK regions, made possible by their “regional footprint”, rather than concentrating all of their time and efforts in London and the South East, where competition is typically much higher. The combined portfolio currently holds 40 investments, with top holdings including GO Outdoors and DisplayPlan Holdings.

Although the VCTs do not have an explicit annual dividend target, they aim to pay an attractive and rising level of dividends while maintaining capital preservation. In recent years, the VCTs have paid dividends in the region of 4.5p – 5.5p, plus special dividends.

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