Close Ventures MD sees silver lining to recession
Article Date: Jan 22 2008Patrick Reeve, managing director of VCT provider Close Ventures, is anticipating a recession in the UK, but says the downturn will offer good opportunities for VCTs to invest funds they have already raised. He adds that Close, which manages £240 million in its non-AIM VCTs, is looking forward to a year of sustained activity both in investments and realisations.
‘With the banking climate being as it is and lenders drawing in the reins, this is a really good time to be investing,’ Reeve tells GrowthBusiness. ‘To survive, businesses will have to raise equity.’
Reeve is expecting the Close VCTs’ ‘steady stream of exits’ to continue, with ten to 15 per cent of its investee companies already in discussions with potential purchasers.
However, he is more cautious about fundraising prospects for 2008. Close is expecting to raise a further £20 million for the VCTs it manages by the end of this tax year, but next year the amount raised may be more modest, Reeve suggests.
‘We’re assuming there’s going to be a recession,’ he says. ‘That doesn’t mean you shut up shop, but we are taking a more cautious view of growth when we invest.’
Nevertheless, Reeve says Close’s principle of only investing in companies that do not borrow money externally will help to cushion its investments against ‘bankers getting nervous’.
In general, the decrease in tax relief for VCTs that took effect in the current tax year (from 40 to 30 per cent) has encouraged investors to focus more on investment returns as opposed to tax breaks, Reeve argues.
‘From my own observation of our 12,500 shareholders, they love getting the tax breaks but, once they’ve got them, they tend to forget about them. They will then concentrate on how their investments are doing – which is the right way of looking at it in our view,’ he concludes.
Close Ventures manages seven VCTs that invest chiefly in unquoted companies. It also administers three AIM VCTs, with total assets of £90 million.
