ShareSoc's Response to Patient Capital Review

ShareSoc’s Response to Patient Capital Review

On 1st August 2017 H.M. Treasury launched a consultation on the subject of financing growth in innovative firms (a.k.a. The Patient Capital Review), which can be found here. ShareSoc and UKSA submitted a joint response to this consultation on 22nd September: ShareSoc -UKSA Patient Capital Patient Capital Review – FINAL VERSION 20170924

Our response included the following comments:

Individual shareholders are the archetypal long-term investors. They tend to invest for retirement, to fund care in later life and to pass on wealth to future generations, as well as for growth and income.
The FCA Asset Management Market Study has highlighted the high fees (and other charges and forms of remuneration) and the anti-competitive behaviour that occurs in this industry. This effectively increases the cost of capital for innovative growth firms and reduces the supply of investor capital. Walker and Kay also identified this issue. Sorting out the excesses of the financial services industry is proving difficult.
The banks’ behaviour since the 2007/08 financial crisis, when they squeezed their customers, withdrew facilities and demanded much higher and more onerous terms has resulted in a huge decrease in the confidence of their customers in the banks . This will take a very long-term to correct.
The taxation treatment of debt versus equity is not equal. Interest on debt is tax-deductible, whereas payments of dividends to shareholders come out of after-tax profits.
As a consequence of points 3 and 4 above, many companies take on debt and have a very short-term orientation.
Capital gains tax has been subject to a huge number of changes over the past 40 years. Government should not expect a long-term perspective from companies and their owners if it keeps changing the rules. In future, Government should only make changes infrequently and only when they are clearly necessary. Presently, there are two main issues:
1. Capital gains tax taper relief over 10 years should be reintroduced. The idea that the longer you hold an investment the lower the tax rate will be a huge factor in increasing long-term thinking. The removal of this taper relief (and prior to that, its reduction from 10 years to a shorter period) has been instrumental in stimulating a short-term focus and culture.
2. Capital gains tax for individuals is assessed on each individual investment , so if an investor wishes to take a profit which is then reinvested in another growth or innovative company, the investors’ capital is reduced by a taxation charge. The investor has not at this stage had access to his capital to spend it, so it is illogical to tax him or her at this time. This contrasts with investments held in an investment trust, where no capital gains tax is levied on gains within the trust; only on amounts that are taken out of the trust.
We, in Britain, need to create a culture of long-term thinking. Patient capital is needed. We need a culture whereby we think about accumulating wealth gradually. The get rich quick culture of the early 2000s served to create a large social imbalance.
The UK markets give lower valuations than US markets to growth companies and innovative companies. This creates an opportunity for US based companies to acquire UK companies cheaply. This is one reason why the UK has failed to produce large successful innovative growth companies on the same scale as the US.
We can see no representative of individual investors on your steering committee. This is a shameful major omission, and is evidence of the way in which individual investors continue to be ignored and underestimated. Direct individual investors make up 12% of the UK stock market, and with indirect individual investors via funds represent 30%. Your steering committee comprises representatives of fund managers rather than underlying asset owners. We note also that successful ‘hands-on’ entrepreneurs such as Luke Johnson and James Dyson are not represented on your panel.
The current VCT tax reliefs are justified by creating incentives to invest. There is no evidence of excessive profits for individuals investing in VCTs. The VCT regime seems to be working satisfactorily. Government should resist the temptations to significantly change something which is working. (Minor changes to stop abuse should be implemented, but only after careful consideration of other consequences.)

Mark Bentley

Director

Post Date: September 25, 2017

Group description:	All levels of experience welcome. A typical meeting agenda includes: – Macro Environment – Trades: Members review existing positions and identify securities with promising TA entry patterns or setups and with suitable risk/reward. Any security, long, short, futures, options may be considered. The convener takes actual positions in trades and maintains his own detailed ledger, accurately measuring performance of individual securities and cumulative activity. Members are notified by e-mail prior to the entries or exits that are decided upon. Following each meeting an updated copy of the ledger is circulated together with the next meeting agenda. Members may wish to maintain similar ledgers of their own but there is no obligation to do so. – Technical Analysis: Techniques and systems used in trades. Members can request discussion of particular aspects of TA.
Meeting Type/Venue:	Online via Zoom
Meeting Frequency/Timing:	The first Tuesday of every month from 7 to 9pm

Group description:	Following the launch of the SIGnet Technical Traders groups, it was identified that there were a number of members who use fundamental and other information as their main source of choosing companies to invest in, who would find some understanding of technical analysis helpful to identify good entry and exit points for their investments. This new SIGnet Technical Analysis in Support of Investing group is therefore being launched and we welcome members of all levels of experience to join.
Meeting Type/Venue:	Online via Zoom
Meeting Frequency/Timing:	There will be an initial Zoom meeting on Monday 29th April at 7pm to launch this group, please email info@sharesoc.org if you are interested in joining.

Group description:	A new in person group coming soon! Keep and eye on our Events page to register for the launch meeting.
Meeting Type/Venue:	In person
Meeting Frequency/Timing:	TBC

Group description:	Open to all investors / people with an interest in investing. Typical meeting will involve members talking about recent purchases, successes, failures and possible future purchases. Also with occasional visiting speakers or members making presentations on a topic of interest.
Meeting Type/Venue:	We aim to meet on the last Tuesday of each month in a private room at a pub in Playhatch. Start time 7pm with members encouraged to meet up around 6pm for a bite to eat / drink before hand, if their diaries allow.
Meeting Frequency/Timing:	7pm on the last Tuesday of the month. Meetings likely to last about two hours but with informal ‘overspill’ before / after.

Group description:	This group was set up as a forum to discuss companies in detail, each company is introduced by a member and discussion may last one or two hours. Membership is by invitation only and is for experienced investors.
Meeting Type/Venue:	The group meets at a venue in Waterloo, London.
Meeting Frequency/Timing:	Meetings are on Tuesday mornings at two month intervals.

Group description:	Group of investors that meets on a bi-monthly basis to discuss all things happening in the world of investing, share each other’s knowledge and give the benefit of each other’s experience. Group primarily focuses on unit trusts, open ended investment companies and investment trusts. However, all investments are up for discussion and new members are always welcome and encouraged.
Meeting Type/Venue:	Remotely via Zoom on Saturdays on a bi-monthly basis, on dates collectively agreed by all group members.
Meeting Frequency/Timing:	Bi-monthly.

Group description:	Our group members have wide ranging investment experience and work backgrounds. Discussion topics include reviewing our recent stock or collective investment buying and selling activity, plus what we are considering buying or selling and the reasons for our decisions. We also have a wider discussion on where we think opportunities might arise in the next few months and what we think needs to be avoided. Members occasionally lead discussions on specific topics such as recent events attended, articles or books of interest and sources of investment ideas and information.
Meeting Type/Venue:	During the pandemic our meetings were held on Zoom, but we have now resumed meeting in person at a location a few miles to the west of Colchester. Most meetings will now be in person, but it is possible that occasional meetings will be held on Zoom in special circumstances.
Meeting Frequency/Timing:	We meet midweek every two months. Zoom meetings run for about two hours from 10.30am and in person meetings from 11am until about 3pm, including a break for lunch.

Group description:	Our group is a broad church that contains investors of varying age and experience. We discuss stocks and investment trusts that we have bought, sold or are interested in and the reasons behind our decisions, and try to make sense of the ever changing investment environment. Our members backgrounds are diverse and include corporate banking, engineering, teaching and the leisure industry. Discussions are robust and challenging but tend to be to be informal, and do not generally involve agendas, presentations or detailed preparation. We are a friendly and approachable group who welcome investors of all levels – we just ask that you contribute, at whatever level you can.
Meeting Type/Venue:	Our meetings are held in a very nice pub near to South Ealing tube station (Piccadilly Line), not far from Ealing Broadway (District, Central and Elizabeth Line). Group numbers permitting (and assuming members are happy to purchase food and drink from the bar), we may also have access to a private room in the pub.
Meeting Frequency/Timing:	We meet every 2 months, usually on a Wednesday morning at 11am.

Group description:	An online group for those who already have some experience in investing. Covering topics such as finding companies to invest in, financial statements and ratios, valuation / margin of safety, analysis of companies and investment trusts and exchange traded funds.
Meeting Type/Venue:	Online using Zoom.
Meeting Frequency/Timing:	Meetings are usually held on the 3rd Thursday of the month at 7:15pm.

ShareSoc’s Response to Patient Capital Review

Share this:

Leave a ReplyCancel reply