VCT`s

Cagey

Hi guys,havn`t posted for a while & my last login says 1970 at 1am but I don`t think it was as long ago as that.

Does anyone have a view on Venture Capital Trusts. The tax incentive looks good but with any other investment the returns look a bit up & down depending on the provider.

Has anyone invested in these & what is your experiance.

Is there a fund that stands out from the rest.

Thanks in advance.
Kenny.

cheerfulcat

Hi, there,

VCTs are very very risky. Yes, you get the tax benefits but in return you are paying extremely high charges and taking big chances with your money. Also, the tax reliefs only apply to new VCTs, so when the time comes to sell you mightn't find a buyer ( or at least, not at a price you're willing to accept ! ).

More here -

http://www.fool.co.uk/news/comment/2005/c050201c.htm

http://www.trustnet.com/vct/


I think that VCTs are probably great for high earners who would rather have a mad punt than pay tax, but for normal investors they're just too chancy.

HTH

Cheerfulcat

dunstonh

In addition to what cheeful cat has said....

The costs on these are typically very expensive. You can expect establishment costs of 5-6% of the gross subscription. Arrangement fee of 2%. AMC of 2%. Monitoring, admin and other fees between 0.5 and 1.5% and incentive fees of usually 20% of any excess growth above 7%pa.

They are substantially long-term ans illiquid investments. Many offer little tangible reward other than the prospect of significant value in the distant future without offering an exit route.

These type of investments are considered higher risk from an advice point of view. Many IFAs will not transact this type of business due to the increased risk of future claims. i.e. 20 years down the road, a client wants out but can't find a buyer so he complains saying he wasnt aware that he couldn't liquidise on his terms. The fact that it is considered high risk business, should put you on guard straight away.

Cagey

Thanks guys, for your input. I did think they were risky & long term but was only going to go with 5K from which IR would give me 2K back. I could afford to lose 3K but wouldn`t like it. Have to admit the difficulty in cashing them in has put me off a bit.

Cheers Guys.