Octopus has launched a new venture capital fund that will enable investors in the Octopus Titan VCTs 1-3 to continue to benefit from the star performers in their portfolio, while ensuring the VCTs remain qualifying and able to support more UK smaller companies.
The fund launch came after a record number of Octopus’ VCT shareholders voted on the initiative.
The proposal, which sees the VCTs sell their holdings in four underlying portfolio companies – Zoopla Property Group, Graze, Calastone and Secret Escapes – to a new fund that will be financed by institutional investors and managed by Octopus, was announced to shareholders in May following approval from the UK Listing Authority.
As part of the transaction, the VCTs will retain 50 per cent of their original investment in these companies by owning a stake in the new fund, enabling investors to benefit from the anticipated future increase in their value. The transaction, which has been approved by HMRC, creates an opportunity for the VCTs to retain their qualifying status while further supporting the star performers in the portfolio as they continue to build on their success.
Alex Macpherson (pictured), fund manager for the Titan VCTs and head of the ventures team at Octopus, says: “We are really pleased that our VCT investors have given us their full support and proactively voted in favour of our proposal. We wanted to find a solution that allowed us to continue to actively manage the portfolio, ensuring each VCT remained qualifying and that shareholders’ tax reliefs were maintained, while enabling our investors to benefit from the continued success of these four companies.
“The fund presents an opportunity for us to enhance returns for our shareholders, while also attracting much needed institutional investment into the European venture capital market. We strongly believe that the proposal is in the best interests of our investors, the VCTs and our portfolio companies and we are extremely pleased to have their full support for the transaction.”
The cash realised through the transaction will be used by the Titan VCTs 1-3 to fund new and follow-on investments, as well as funding future distributions to shareholders in the form of tax-free dividends and financing share buy-backs.
The institutional investors in the new fund are DB Private Equity & Private Markets, the private equity platform of Deutsche Bank Group’s Deutsche Asset & Wealth Management division, and Seligman Private Equity Select, a fund-of-funds exclusively dedicated to small European private equity funds.
Bluetower Associates, a private equity advisor focused on direct secondary market transactions, advised Octopus on the transaction.
Tim Griggs, managing partner of Bluetower Associates, says: “It has been a pleasure to work so closely with the Octopus team. To the benefit of all parties, this new and innovative fund structure bridges the gap between the venture funding provided by VCTs and the funding of more established companies by institutional investors. It provides Octopus with a powerful fund management tool which allows both VCT and institutional investors to participate in the future success of outstanding companies.”