Nova Cofoundery SEIS & EIS Fund is a fund that aims to invest in 10 companies that are eligible for SEIS or EIS relief. The target return for each investee company is a three-year return of £1.72 before tax relief for each £1 invested (although investments are expected to be held for an average of six years). Returns will be focused on capital gains and investors are unlikely to receive any dividends. The aim is for the assets to be invested as soon as possible after receipt.

Why invest

Positives

• Strategy: To invest in a portfolio of newly formed companies, with a unique support infrastructure provided before and after investment.

Issues

• Volume of investments: While Nova has tested its ability to scale its sourcing, a full fundraise will require a faster rate of investment than achieved so far.

The investment advisor

Positives

•  Team: The experienced management group has spent a decade honing its methodology, supported by a large team of specialists.

Issues

• Past performance: While the team has produced an impressive IRR on an unrealised basis, there have only been three exits to date.

Nuts & bolts

• Offer period: The fund is evergreen, with deployments each month and expected full deployment within a quarter.
• Diversification: Mixture of SEIS and EIS investments. The aim is to invest in 10 companies with higher weights in the EIS investments.
• Valuation: Investors will have access to an in-house online system, which will be updated on an ongoing basis.

Fees

• Fees: All fees, apart from the performance fee, are charged directly to companies.
• Performance fee:  20% on gains over a return of 150% of total capital invested.

Risks

• Risk mitigation: Nova’s focus is on using the support it provides to mitigate the investment risk of investing in new start-ups. There is some evidence this is effective.
• Target return: Overall, as is normal for (S)EIS funds, the strategy is high risk, with the three-year return target of £1.72 (including tax relief), although this is effectively understated due to the expected five-to-seven year holding time for investments. Individual investments will have a higher target, offset by a proportion of failures.

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