|
Baigrie Davies Blog
|
We last mentioned Venture Capital Trusts (VCT) in our November blog commenting that for the right client they can help with tax planning and prove a profitable, if higher risk, investment.
Our view remains that the Generalist ‘Top Up’ VCT’s, whereby an existing VCT raises new money, is where investor interest lies this year.
In particular the trend this year is where a number of Generalist VCT providers are offering ‘Linked Top Up’s’. This is where your VCT investment for this tax year will be invested into not just one of the VCT provider’s underlying VCT funds but a number of them.
A ‘Linked Top Up’ can have a number of advantages for the VCT and hence the investor compared a completely new VCT.
- For a completely new VCT, the provider will have to work hard to ensure that the monies it raises are invested within the 3-year allowable timescale so the tax breaks are retained. This can mean a long lead-time before dividends appear as full investment might take three years if suitable deals are hard to find.
- This is in contrast to a Linked Top Up where you have instant exposure to a mature portfolio of companies that are already in theory generating a return and the VCT manager can pay a dividend almost immediately.
There are two Generalist VCT’s offering a ‘Linked Top Up’ that we favour this tax year, both have been well rated by independent external rating agencies.
One provides a link to three existing VCTs with immediate access to assets of £97m with 80 underlying companies. The provider here is looking for a minimum annual dividend yield of 4% tax free, equivalent to a gross yield of 6.66% for a 40% taxpayer.
The second provides a link to seven existing VCT’s with immediate access to assets of £200m with 55 underlying companies. Again the target is an annual dividend yield of 5%, equal to a gross yield of 8.33% for a 40% taxpayer.
Piers Larcombe
--
0
comments:
-
Post your own comment
|
|
A survey from First Direct has highlighted the biggest financial regrets during 2010 for adults in the UK. Within the top 10 were…
- Not paying off debts more quickly
- Not saving for retirement earlier and
- Slightly bizarrely, paying for an expensive wedding (presumably a number of those surveyed were divorced in 2010…)
In addition when asked which areas of their finance people were least happy with, 8 out of 10 said it was the amount of their pension provision and three quarters were unhappy with the amount they had saved. No real surprises there in these more austere times.
Interestingly, Google tells us that during the first three months of a New Year there is a marked increase in the number of people searching for information on pensions compared to the rest of the year. Is this just a happy coincidence or we are all acting upon our New Year financial resolutions? The recent changes to pension legislation, highlighted in a previous blog, suggests that the first quarter of the year is the time to act to avoid the same regrets this year as many had last year.
The closing few weeks of 2010 and the beginning of 2011 have seen a strong upswing in the value of risk assets. During this upswing, emailed predictions from many investment institutions have been flooding into my inbox, some seemingly very optimistic which brings to mind the slightly predictable quote from the economist JK Galbraith, which even today is still valid -: “There are those who don’t know, and those that don’t know that they don’t know”.
In truth, it is the way the wind blows on a number of key themes during 2011 that will dictate the outcome of the year.
The general expectations are for the world economy to grow during 2011, but with a distinct growth divergence between developed and emerging economies with the latter expected to lead the way.
In terms of developed economies, predictions point towards the US performing best with current and future stimulus expected to be a key driver. The fractured Eurozone, which can be sub divided between growth economies and those with sovereign debt issues, is trailing behind, although overall it is still expect to grow.
The sovereign debt issue in Europe is seen as one of the key risks to world growth and the fixed interest markets as a whole. Careful allocation to the fixed interest sector has and will continue to be key in our recommended portfolios.
Lastly within the developed economies one key theme will be when and whether cash rich companies will start using their reserves in merger & acquisition activity.
The question within emerging economies is whether the predicted growth can continue without asset bubbles being created.
Whilst predictions suggest the global economy will grow in 2011, almost all agree it will be a volatile year as trouble winds blow and potential issues surface. All of this continues to mean we favour a broadly diversified portfolio across a variety of asset classes’ to help minimise volatility and maximise predictability.
Piers Larcombe
--
1
comments:
View
-
Post your own comment
|
Posted by @
04:36 PM, January 27
Thinking as a retail businessman, rather than a wealth manger or investor, I think a really critical issue for us all in 2011 will be how the internal UK political settlement develops. Real people have yet to pay the price for the credit crunch, but we start to do that this year, if that proves a bearable pain then great, but if it leads to protest and riots then the contagion could well spread to the FTSE and from there onwards across Europe. Let's hope George Osborne is as clever as he thinks, sorry I meant WE THINK, he is!
|
|
|
|