By Annabel Brodie-Smith
“Investment companies have long been founded on stronger, indeed granite-like foundations, their robustness tracing to the geniuses who devised and launched them almost 150 years ago, including the legal giants Philip Rose and Lord Westbury and, north of the Scottish border, Robert Fleming, son of an impoverished mill worker in Dundee.”
I hope 2022 is off to a good start for you. My youngest son has just recovered from Covid and had to endure the full ten-day self-isolation. It’s a relief that he is better now and thankfully no one else caught it, but it wasn’t the best start to the year. Luckily this weekend is our delayed New Year’s Eve celebration so things are looking up.
On Sunday it’s 70 years since the Queen came to the throne, a remarkable achievement by the most respected person in the country. And as we get ready to celebrate her Platinum Jubilee, it’s a testament to the investment company sector that 35 investment companies were around before the Queen’s accession and those companies are still delivering excellent long-term performance to shareholders.
Our article contains the thoughts of historian and industry legend John Newlands, who says: “Investment companies have long been founded on stronger, indeed granite-like foundations, their robustness tracing to the geniuses who devised and launched them almost 150 years ago, including the legal giants Philip Rose and Lord Westbury and, north of the Scottish border, Robert Fleming, son of an impoverished mill worker in Dundee.”
AIC media webinar: The outlook for VCTs
With inflation back on the agenda and interest rates beginning to rise, markets have had a volatile start to the year. The sell-off in growth stocks has taken its toll on technology companies in particular. It’s well worth reading Ian Cowie’s article which is an astute analysis of what’s going on in markets. Ian explains how the sell-off could be good news for British companies “as investors may begin to value ‘a ‘bird in the hand’ - or dividend income today - rather than the promise of ‘two in the bush’ or growth tomorrow.” He thinks British investment companies which have long records of raising dividends like City of London, JPMorgan Claverhouse and the other dividend heroes will benefit.
Despite the market volatility, venture capital trusts (VCTs) are in demand and this tax year we are seeing record investment by private investors. This is great news for the UK’s businesses which will benefit from this funding and support. This week I have enjoyed talking to VCT managers who invest in some of the most exciting young companies in the UK. If you’re not familiar with VCTs please do read our guide which explains more. Investors receive attractive tax benefits from VCTs, with 30% up-front tax relief for investors who hold new VCT shares for five-years and their dividends are tax-free. But the strong performance of VCTs has also supported demand. In 2021 VCTs had an average total return of 24% and even during the pandemic in 2020, the average return was 4%.
Post-pandemic, investors have also woken up to the economic and social boost that young private companies give to the economy. VCTs’ investments create jobs and wider benefits for society. The managers work with companies on being better employers, not just because it’s the right thing to do but because the labour market is competitive and attracting and retaining talent is crucial to success. VCTs can also help with levelling up, a hot topic after the government’s announcement this week. Do watch my video or read our article to find out more about VCTs. In the video I speak to Malcolm Ferguson, Partner at Octopus Ventures which manages Octopus Titan VCT, Chris Hutchinson, Lead Manager for Unicorn AIM VCT and Bevan Duncan, Manager of the Baronsmead VCTs. And on the topic of unquoted companies, Hannah Smith explains how investment companies offer “the perfect gateway to access investment companies and benefit from their growth before they reach IPO stage." I hope you have a good month. The snowdrops are now out in Oxfordshire and before we know it we’ll see the first daffodils of spring. I can’t wait!
Annabel Brodie-Smith Communications Director, AIC
