Four venture capital trusts have bagged £45m from investors in just 24 hours in a vote of confidence for the vehicles after ministers reversed a decision to wind them down.
Venture capital trusts, which allow retail investors to back small start-ups via pooled cash and reap generous tax breaks, were due to wind down in 2025. But Kwasi Kwarteng opted to ditch the so-called ‘sunset clause’ for the schemes in one of the few decisions to remain from his disastrous mini-budget.
Four new ‘Mobeus VCTs’ were launched by investment firm Wealth Club at 9am on Monday in the wake of the decision and have now bagged £45m from investors – with over £24m raised in the first three hours.
The chief of investment service firm Wealth Club, which administers the funds, said the raise was the “fastest-selling VCT offer we have seen”.
“Despite the gloomy economic outlook, investors are still exceptionally keen to invest and support early-stage businesses when the right opportunity is presented to them,” said Alex Davies, Wealth Club boss.
He added that high tax rates were likely to push investors towards the trusts this year as they look to reap the breaks offered by VCT schemes.
The Four Mobeus schemes’ portfolios include around 41 companies, currently valued at £365.7m as of June, Mobeus said, including Virgin Wines and MPB, the world’s leading marketplace for used photo and video equipment.
Some analysts have issued warnings over the VCTs in the past over the risky nature of the schemes and the high failure rate of portfolio firms.
“If there’s a sensible place in your large and diverse portfolio for VCTs, they offer some impressive benefits, but if you invest purely for tax reasons, and don’t consider the risks involved carefully, you could be making an expensive mistake,” said Sarah Coles, analyst at Hargreaves Lansdown earlier this year.