Two more venture capital trusts launch fundraising drive ahead of Budget

Two venture capital trusts have launched fundraisers for £75m each as investors rush into the vehicles ahead of a potential hike in capital gains tax at the Budget.

While the rate of capital gains tax sits at 20 per cent, rumours have swirled that Chancellor Rachel Reeves could double it at next week’s Budget.

However, profit made from venture capital trusts (VCTs) are exempt from capital gains tax, as well as investors being able to claim 30 per cent income tax relief on their investments.

As investors have piled into VCTs, the Octopus Apollo VCT and the British Smaller Companies VCT both launched offers today for £50m with £25m overallotment facilities.

Octopus’ VCT has £439m in assets with a portfolio of 45 companies, while the British Smaller Companies VCT has £415m in assets and a portfolio of 42 companies.

YFM Equity Partners, manager of the British Smaller Companies VCT, has “an excellent reputation and has built up a strong following among investors,” said Jonathan Moyes, head of investment research at Wealth Club.

The VCT focuses on technology companies with a bias towards data, tech-enabled services and new media, with its largest holding, Matillion, achieving ‘unicorn’ status.

Meanwhile, the Octopus VCT invests in more mature businesses, especially in software companies selling into corporate customers.

Over the last five years, the Octopus VCT delivered a total return on its underlying assets of 49.4 per cent, and targets a dividend equal to five per cent of its underlying value.

“The VCTs have benefited from a flurry of recent exits, which we expect will help maintain the VCTs formidable, if volatile, dividend record,” added Moyes.

The sale of display designer Displayplan brought £19.2m to the VCT in February, 9.6 times its original cost. In total, the VCT has sold £80.7m worth of businesses during the past two years.

The news comes following the successful £90m fundraise of two Mobeus VCTs this week, which took onto 45 days to be filled.

“As the rapid closure of the Mobeus VCT offer has shown, popular VCTs can disappear quickly,” said Moyes.