VCTs

[westhamtim]

Does anybody have experience of investing in these? I'm familiar with the theory and the risks as reported in the financial press and broker's websites but would be keen to see if people have experience of the practice. I'm specifically concerned about investing into a closed shop where my exit is governed by a fund manager and, connected to this, the risk that the tax breaks surpress returns; the fund manager / broker figures that I've already made 30% so it's only fair that they rip me off on the spread, right? (I have a healthy suspicion of some aspects of the investment management industry).

I'd be happy to take a long term (10 years) view, and would keep it as a relatively small part of my portfolio (10%).

I'm keen to get involved as the theory of great tax breaks and investing in small companies when financing is otherwise tight and at the start of an economic recovery (maybe) is appealing. But at the same time I'm keen for this not to be one of those lessons one learns the hard way.

[Rambaud]

I think the failure rate is something like 8 out 10?

[jeff m2]

I thought VCTs were closed end funds normally trading at discount (listed)
Unless I misread your post you are decribing something akin to a LLP where the exit can be restricted.

As is the entry (by not being a HNWI)

[westhamtim]

Believe me I'm not a HNWI, just keen on exploring tax breaks! You can get in from £2k for some funds I believe.

Issue is that shares are very illiquid with often just one broker. The other exit is buybacks from the fund manager. Either exit would put you at the mercy of one party.

[jeff m2]

Having only one guy making a market in them does magnify the downside risk.

(I assume those Greeks are still gonna have elections in April)

I guess you could go through them and look for any with volume.
Sorry I can't be more helpful. Still I've given you a bump.

[sideways sid]

This week's Investor's Chronicle has a multi-page article on VCTs and EISs, which might help. Its for sale in newsagents now.

[Cheib]

There are a few types of VCT's including some that are really not much more than a tax arb.....they invest enough of the fund in "qualifying assets" to give them VCT status but are really aimed at the investors using the tax relief to give some of the returns.

I haven't seen the stats for what I would call "proper" VCT's but my bet is that they are not a great risk/reward trade. Why ? Because if you're a top quality fund manager there are much better ways to get paid for doing that than running a VCT...you will be investing in average/mediocre fund managers.