The OT(S)EIS The Start-up Fund is a discretionary portfolio service, which will provide a portfolio of investments in unquoted technology companies. The target return is an average annualised IRR of 25% over a 7- to 15-year period. Returns will be focused on capital gains, and investors are unlikely to receive any dividends, although this is not excluded. The fund is evergreen.
Why invest
Positives
Strategy: Exposure to a portfolio of early-stage science and technology companies in the Oxford area.
Issues
► Unusual investment structure: While diversification is normal for the sector, there is a three-year investment period.
The investment manager
Positives
Team: The two directors are among the most experienced in the (S)EIS industry with international support.
Issues
Small team: While the team is adequate for the current portfolio, further recruitment will be required if it grows.
Nuts & bolts
Duration: The fund is evergreen, with no formal closings, and investors simply participate in the deal flow after investment.
Diversification: The manager aims to provide each investor six SEIS investments in year one, and six EIS investments in each of the next two years. Most of the latter are likely to be follow-ons into the same SEIS companies, typically giving 8-10 companies per tranche.
Valuation: Updated quarterly following EVCA guidelines, with qualitative comments.
Fees
Fees: A combination of direct fees and company charges. Three years of annual fees are effectively deducted from the subscription.
Performance fee: Charged at 20% on aggregate returns over 120% of subscription.
Risks
Target returns: The benchmark average IRR of 25% over 7-15 years suggests a high-risk investment strategy.
Companies: Supplying risk capital to very early-stage technology companies. There will be a spread of company returns as the successful ones will do very well, but those that fail may do so completely.
