While commonly used for tax planning, VCTs should be subject to the same research and selection process as any other investment.
While commonly used for tax planning, VCTs should be seen, first and foremost, as investments.
A strict set of rules governs what companies VCTs can invest in, but within these rules, there is still enough flexibility to allow VCTs to pursue a number of different strategies, for example:
- Generalist VCTs invest across a range of sectors, mostly in unquoted businesses
- AIM VCTs invest in companies quoted on the Alternative Investment Market (AIM)
- Specialist VCTs focus on a particular sector, such as media or technology
- Limited Life VCTs aim to wind up after the five-year period necessary for retaining the upfront income tax relief has elapsed
An appreciation of the risk/reward profiles of different VCT strategies is important for financial planners and wealth managers who want to ensure the recommendations they make are suitable for clients – whether or not they use external research to assist them.
Other important factors to consider in the research process include a VCT’s criteria for investment selection, dividend policy, buy-back scheme, and in the case of a top-up offer, the maturity of the underlying portfolio.
To help financial planners and wealth managers gain a better understanding of the essential considerations involved in researching VCTs, the Association of Investment Companies (AIC) is running three educational seminars around the UK. Led by Head of Training Nick Britton and with prominent VCT managers as guest speakers, the morning seminars will be held in Leeds on 18 January, Birmingham on 19 January, and Guildford on 1 February. They are free of charge and count as structured CPD.
To book, contact Debra Gibbons on 020 7282 5572, email debra.gibbons@theaic.co.uk, or use the online booking form.
The Association of Investment Companies (AIC) represents the interests of the investment trust industry and their members include a broad range of closed ended investment companies, investment trusts and VCTs. The AIC has 338 members and the industry has total assets of approximately £113 billion. The AIC lobbies on behalf of its members, promotes best practice and provides information and training on investment companies to financial advisers. To find out more about our training programme and information on investment companies please go to our adviser website