A university academic has just joined the VCT Investors Group and he emailed me with this interesting story and commentary, which other readers might find of interest….
As you know, my principal issue is that VCTs are predominantly run by the fund manager in its own interests. I have seen VCTs in the past pay performance fees to their fund manager even when the performance has been dire (i.e. the performance fee has been paid out of the net asset value of the company, diminishing the net asset value over the year as the performance was so poor).
Our problem is that wealthy investors have nowhere to put money for tax relief other than EIS and VCTs now that pension contributions are restricted.
I waged a single-handed campaign against the chairmen of ProVen and ProVen Income and Growth VCTs 2-3 years ago. This was successful to the extent that they redrafted their hurdles for paying performance fees so that they align the interest of the management company (in their case, Beringea) with those of the shareholders. I am concerned about British Smaller Companies and about Foresight but otherwise I am reasonably happy with the many other VCT companies that I am invested in. The total value of my VCT investments over approximately 16 companies is around £480,000. I am delighted to be able to report that I received a divided income (tax-free) of £44,000 this last tax year due to a couple of special dividends. Nevertheless, carefully selected investments in early stage companies should do a little better than many VCT companies achieve.
If you have similar concerns then please join the VCT Investors Group https://www.sharesoc.org/campaigns/vct-investors-group/
(blog from Campaign Manager Cliff Weight)
Very much agree with the writer on these issues, and certainly the performance incentive fee at British Smaller Companies is very poorly structured. I voted against it when it was introduced and I vote against the Chairperson who introduced it every year as a result.
Re: Beringea fees. Is this the changes voted through in August 2014? I certainly wouldn’t consider that a good result, and said so at the time: http://boards.fool.co.uk/vct-perfomance-fees-the-ugly-12965994.aspx?sort=whole#13060624 . 1.3 million NO votes agreed.