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The Octopus AIM VCTs have announced an offer for up to £30 million (£20 million + £10 million overallotment).
The VCTs have total net assets of £200 million and a portfolio of 80 companies.
The portfolio includes a sizeable number of established businesses, with 67% of companies profitable, while the VCT invests new money in qualifying AIM fundraises.
Over the ten years to June 2024 the VCTs delivered a NAV total return of 1.2% and 4.3% respectively.
The VCTs target a dividend of 5p and 3.6p, or a yield of 5% (whichever is greater).
Nicholas Hyett, Investment Manager at Wealth Club said, “To say it has been a tough few years for the AIM market would be an understatement.
“The result is that performance among AIM VCTs, including Octopus AIM, has been lacklustre. This has not been helped by risk of reforms to Business Relief rules, which may see certain AIM stocks no longer qualify for inheritance tax relief.
However, there are reasons investors could still look on AIM VCTs with some optimism.
First, a lot of the pain is now in the rearview mirror – AIM valuations are low, creating scope for a recovery if sentiment turns. Secondly, if the Budget leaves AIM broadly unchanged, a flurry of new listings could reinvigorate the market. Finally, the pain suffered by the highest risk AIM companies mean AIM VCT portfolios are now weighted towards the more mature investments they made years ago.
In the case of the Octopus AIM VCTs, 67% of companies are profitable and 50% pay a dividend. The trusts’ largest listed holding is Breedon – a construction materials group the VCTs first backed in 2010 and which now operates across the UK, Ireland and the US. That sort of investment lends ballast to the portfolio, while newer investments could participate in a growth recovery.
For contrarian investors, the appeal of backing an unloved market (AIM) within an unloved country (UK), may prove an enticing prospect. An AIM VCT provides access to this theme with 30% income tax relief and tax-free returns.”
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