Strategy: To invest in a portfolio of more established unquoted companies in order to preserve capital value while generating an income stream.
Issues
Exposure level: With the majority of the VCT being funds raised in the last couple of years, just under half of the assets are currently invested.
The Investment Manager
Positives
Team: One of the longest-standing managers in the VCT/EIS area, Calculus has a highly experienced and stable team.
Issues
Past performance: Some write-offs have adversely affected the company’s previously very good performance. An average realised 12% IRR is still credible.
Nuts & Bolts
Offer: To raise £10m, with a £5m over-allotment facility in the 2020/21 and 2021/22 tax years.
Diversification: The existing portfolio has 31 investments.
Valuation: Investors will receive valuations twice a year. Industry guidelines will be used, with two auditors examining the figures.
Specific Issues
Fees: Mixture of direct fees and fees charged via the investee companies.
Performance fee: 20% on investor share of proceeds over 105p for every 100p invested.
Risks
Risk mitigation: The aim is to diversify by sector, and the focus on relatively more established companies should also help mitigate some of the risk.
Target return: Overall, the strategy is medium-risk relative to other EIS/VCT products, with the target company IRR of 20% and capital return of 2.5x towards the top end of what we would expect for that risk category. The VCT targets an annual dividend of 4.5% of NAV, while also providing capital growth.
