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 £2.18 after tax relief for each £1 invested (although investments are expected to be held for 5-7 years). Returns will be focussed 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 strong support provided before and after investment.

Issues

• Volume of investments: While Nova has tested it 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 10 years 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 two exits to date.

Nuts & bolts

• Offer period: The fund is evergreen, with deployments in April and October.
• 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 receive four valuations a year. Industry guidelines will be used.

Specific issues

• 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 £2.18 (including tax relief), though 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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