New research published by Wealth Club shows that almost a third (31 per cent) of Venture Capital Trust (VCT) investments are into privately owned companies that are growing revenues at more than 50 per cent a year. This is compared to just 3.2 per cent of the UK’s top 350 listed businesses.
In addition, nearly half (43.1 per cent) of VCTs’ investments are into companies that have grown revenues by more than 25 per cent, year-on-year, which is considerably higher than the 5.9 per cent of the largest 350 constituents of the UK main market that have also achieved this benchmark.
A VCT is a fund that invests in a basket of young, privately owned fast-growing companies. Their purpose is to support early-stage businesses to grow and create employment opportunities whilst also aiming to make a good return for investors. This tax year to date GBP755.4 million has been invested into VCTs which is more than double the GBP360 million invested over the same period in the 2020-21 tax year.
Jonathan Moyes Head of Investment Research at Wealth Club says: “We believe VCTs are establishing themselves as the UK’s growth asset class. They are arguably one of the best ways investors can get exposure to the UK’s increasing number of privately owned high-growth companies. Despite the UK having a leading position in Europe for the creation of such companies, this area is woefully underrepresented in the UK main market, as measured by its 350 largest constituents by market capitalisation. For investors looking to back the UK’s growing crop of innovative early-stage companies, they would be hard pressed to find a better avenue than via a portfolio of VCTs.
“VCTs have raised record sums this year and whilst tax incentives are a key driver of this demand, the ability to back some of the UK’s brightest early-stage companies is clearly finding favour with investors.
“What’s more, the continued success of the VCT sector may in turn help to sow the seeds of future entrepreneurial success. We are seeing an increasing number of founders starting businesses who previously enjoyed success with other ventures, either as founders or senior employees. In addition, the support available for companies via incubators and accelerators has never been greater. Taken together, it is clear to see why the UK is an attractive destination for investors. The more experienced the UK venture ecosystem, the more capital it attracts, the more capital it attracts, the more successes it generates, the more successes it generates, the more experienced entrepreneurs it creates. This is an exciting time for the UK and its venture capital ecosystem.”
Highlights from the report show that 31 per cent of VCT investments are in companies that have grown revenues by over 50 per cent, compared with just 3.2 per cent for the UK main market.
Nearly half (43.1 per cent) of VCT investments are in companies that have grown revenues by more than 25 per cent year-on-year. By comparison just 5.9 per cent of the largest 350 constituents of the UK main market have achieved this.
The 11 VCT managers’ portfolios have significantly greater exposure to high-growth companies than the UK main market.