The latest figures from the AIC revealed that the VCT sector had raised £429m in the 2014/2015 tax year, the highest amount raised since 2005/6, with VCT funds under management rising from £3.22bn to £3.46bn over the year to 5 April 2015.
Guy Tolhurst, managing director of Intelligent Partnership, said: “We think that advisers may have been wary of VCTs in the past because of their reputation for high costs, trading at a discount to the NAV and because of the marketing advantages open-ended funds enjoyed pre-RDR.
“Our research suggests that this is now starting to change, and more and more advisers are considering VCTs”
Ian Sayers, chief executive of the Association of Investment Companies, said at Intelligent Partnership’s recent VCT masterclass: “With the pension freedoms now a reality, the importance of tax planning for those in or near retirement has never been more important. The ongoing changes to the lifetime and annual allowances for pension contributions are also leading to increased demand for VCTs.”
The report looked closely at the potential impacts of the recent changes announced in the July Budget to ensure continued compliance with EU State Aid Rules.
Funds raised via the scheme can no longer be used for company acquisitions or management buy outs, and this will mean that some VCTs will have to adjust their operating models and are likely to have to take on more investment risk than previously.
Mr Tolhurst said: “It’s ironic that just as new pension limits and changes to higher rate tax relief make a great investment case for VCTs, changes driven by EU rules will put the brakes on fundraising for some outfits.”
Dan Kiernan, Intelligent Partnership’s director of research, said: “When assessing VCTs, advisers need to be careful and must take the new rules into account if they are looking at a performance track record that was based upon an investment strategy built around acquisitions and MBOs”.
Both Puma and Octopus VCTs are now available via the Transact platform and Intelligent Partnership found that more are expecting to follow in their footsteps.
Jonathan Gunby, chief development officer of Transact said: “This development further demonstrates our commitment to providing access to the widest range of assets. We are pleased to have worked with Octopus to simplify the VCT investment process and will be adding more VCT providers.”