CHOOSING A VCT

How should investors approach the decision on which VCT to invest in?

1.	Decide if a general or AIM based VCT is suitable, given your investment portfolio and approach to risk.
2.	Subscribe to Tax Shelter Report and read our in depth reviews (compiled after interviewing the fund managers) to differentiate the various offerings in each of the two categories. We use five weighted elements to create our ranking: i. Management’s past track record This is usually calculated without deducting costs or management incentive and is on a drawdown basis, where idle cash lying around between investments is not part of the calculation. Both these will reduce the actual rate of return in a VCT. ii. Manager’s deal flow. This is not the number of proposals the manager receives as they all claim a very high figure. It is the relationship between the rate of closing deals in the last five years and the going rate that the VCT will require to meet the requirement to be 70% invested in qualifying companies within three years. iii. Risk/strategy of the VCT. iv. Management incentive. How much do the managers and sponsors of the VCT take for themselves out of the gains. v. Costs.How much does the VCT cost to run over the first five years.
3.	Consider the potential size of the VCT. We are of the opinion that size does count in this business. A larger VCT can invest in larger deals and should provide a greater spread of investments.
4.	For investors in general VCTs we suggest waiting till we have reviewed all the offerings before making a decision.
Got a question? Use our free callback service to contact our Tax Shelter Report Team.