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Fund of the Fortnight: Mobeus VCT Linked Offer

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17/03/2014
Every fortnight our research experts highlight a fund from their top-rated list.
Fund of the Fortnight: Mobeus VCT Linked Offer

The latest: Mobeus VCT Linked Offer

Venture Capital Trusts (VCTs) are currently seeking a significant amount of fresh investment and with over £500m of capacity this year. As a result, long-term investors comfortable with higher risk investments are spoilt for choice.

Strong pipelines of investment opportunities, coupled with an increased appetite for expansion and management buyouts as the UK recovery gains traction are among a wealth of reasons driving the high supply as VCTs are stepping up in place of banks that remain reluctant to lend to small and medium size enterprises (SMEs).

Significant reductions in both annual and lifetime pension allowances together with investors’ on-going search for yield has meant that demand has been keeping up with this unprecedented amount of fund raising by VCTs. Yet with each VCT offer only raising a limited amount of cash, the most highly rated managers are filling up fast.

In particular, Mobeus Equity Partners is raising £24m through a linked offer into their four VCTs, which have currently raised just over £18m of this target.

Investment into this linked offer will be split equally between their four well established VCTs: Income & Growth VCT, Mobeus Income & Growth VCT, Mobeus Income & Growth VCT 2 and Mobeus Income & Growth 4 VCT, giving investors the opportunity to gain immediate exposure to an established and diversified portfolio, with approximately £181m of assets across the four VCTs.

These are generalist VCTs that invest in UK companies across all sectors, and their investment strategy centres on established, profitable and cash generative businesses.

Mobeus typically invests in finance transactions, primarily management buyouts that are believed to be lower risk, although also they invest in other deal types including acquisitions, secondary buyouts and development capital. These VCTs do not invest in start-ups, early stage or unprofitable companies.

The investment size in each underlying company will range from £5-10m, structured as a blend of loan notes and equity, providing downside protection, income for the VCT and capital growth opportunities.

Each of the four VCTs currently targets a minimum annual dividend of 4p paid annually, although performance has exceeded this.

Sophie Muller is research analyst at Bestinvest

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