Figures published by the AIC last week show that the amount of money invested into VCTs for the 2021/22 tax year has broken through £1 billion for the first time, raising £1.13 billion. That’s 65% more than in 2020/21, and 45% more than 2005/06, previously the biggest fundraising year on record.
VCTs are widely considered one of the best ways investors can get exposure to the UK’s increasing number of privately owned high-growth companies. To receive VCT funding a company must be young, usually less than seven years old, typically have gross assets of £15 million or less, and fewer than 250 full-time employees. Investors are typically wealthier individuals, who are able to claim back tax relief in order to offset the higher risks of investing in younger businesses.
Alex Davies, CEO and Founder of Wealth Club said: “While the last two years have been incredibly challenging for many businesses, VCTs have been a shining light – enabling young companies to access the funds they need to flourish and grow, creating new jobs and strengthening economic growth. Having crossed the £1 billion mark VCTs have finally edged into the mainstream. Packed with some of the fastest growing and most exciting early stage UK businesses they have become a viable alternative to pensions for the many wealthier investors now effectively frozen out of pensions thanks to restrictions brought in by successive governments during the last 12 years.”
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The most popular offers filled well in advance of tax year end, with 13 of the year’s 27 offers fully subscribed by the end of March. This year’s biggest fundraise was £200 million (Octopus Titan VCT) – up from £120 million last year.
Records set for fastest selling fundraises
The year set two records for fastest selling fundraises. First Amati AIM VCT took £8m per day in summer 2021, opening its offer on Friday 30 July and closing on Wednesday 4 Aug having raised £40 million. Then in January 2022, Mobeus VCTs filled their £35 million raise within 24 hours – the fastest fundraise by a wide margin.
AIM VCTs were in particularly high demand during the year, with £170 million raised across four offers – 68% more than the previous year. Research by the AIC revealed that 88% of VCT investors said that it was important to them that VCTs help support the UK economy. 84% said that by using VCTs they’re helping UK entrepreneurs.
The average VCT client is 58 years old, and the average amount invested into VCTs by women in the last tax year was £28,681 across an average of 2.4 VCTs and £42,457 for men across 3.1 VCTs. The average amount invested in to one VCT by Wealth Club clients is £13,000.