Monday 4th February 2008
VCTs launched to profit from credit crunch
Investment banking group Shore Capital is launching two ‘credit crunch VCTs’ which will target investment opportunities thrown up by tighter borrowing conditions. Two new Puma VCTs, which aim to raise £40 million between them, will provide secured loans to companies finding it difficult to raise finance from banks.
Shore Capital, whose existing Puma VCTs raised £60 million in 2005 and 2006, says the new trusts will provide mezzanine and senior debt to ‘well-run companies’. For investors, they offer a ‘lower-risk investment remit, focused on capital preservation’.
Like all VCTs, the new Puma VCTs will secure lucrative tax breaks, provided they invest at least 70 per cent of their funds in qualifying companies within three years.
The VCTs will be run with a clearly defined five-year life. An investor committing 70p to the trusts would buy an investment worth £1 (or 98p, after initial charges) because of the tax relief. After five years the VCTs aim to return 120p to investors for every pound. This is equivalent to an IRR of 11.4 per cent.
Graham Shore, managing director of Shore Capital, comments: ‘Our aim is to devise investment products which reflect changing market circumstances.
‘For the coming period, cash will have a premium value which we intend to capitalise upon.’
Nick Britton
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