The 2016/17 financial year is the second most successful on record for the UK venture capital trust (VCT) market with a total of 18 funds coming to market and raising over GBP500 million, a total bettered only in 2004 when VCTs raised GBP779 million.
Law firm Howard Kennedy acted for 14 funds which collectively raised over GBP375 million.
Keith Lassman, partner and head of capital markets, says: “This is truly an impressive performance by VCTs and reflects the demand and appetite to invest in UK plc.
“What makes it all the more remarkable is that it follows tough tax changes that restrict investment by VCTs essentially into younger riskier businesses, whereas in the past most VCTs have invested in more mature businesses.”
VCTs can no longer make investments in management buy-outs and in businesses more than seven years old, or 10 years for hi-tech businesses.
Lassman adds: “Whilst this will have had some impact on VCT investment strategies, VCT managers have been quick to adapt. In 2016, a record 650,000 new businesses were started in the UK, many hungry for investment. VCTs will provide a key strand to the Government’s drive to encourage ‘patient capital’ investment in innovative businesses.
“Investor demand for tax-efficient investments continues to grow, and VCTs are very well placed to capitalise on the restrictions introduced on pension funds.”
Howard Kennedy has over the past five years acted for 80 per cent of all VCTs to come to market. It remains the only English law firm able to act as both sponsor and legal adviser to VCTs through its wholly owned FCA authorised subsidiary, Howard Kennedy Corporate Services LLP.