Deepbridge are pleased to announce that we have sponsored the Hardman & Co’s TES White Paper, which investigates the effect of adding venture capital to equity/bond portfolios for investors. The paper also shows that venture capital makes a compelling addition, significantly improving investors’ risk/return profiles.
The United Kingdom is lucky to have venture capital schemes that offer significant tax reliefs to investors: Venture Capital Trusts (VCTs), the Enterprise Investment Scheme (EIS) and the Seed Enterprise Investment Scheme (SEIS). The Hardman & Co TES White Paper shows that these tax reliefs hugely improve expected IRRs: almost doubling them in the case of SEIS.
Brian Moretta, Head of Tax Enhanced Services at Hardman & Co commented:
“The paper makes a compelling case for venture capital to be a normal part of most investors’ portfolios. Perhaps the VCT & EIS industry can move from ‘tax-efficient’ to venture capital with benefits!”
The White Paper also shows that a holistic approach to asset allocation is required meaning if venture capital is introduced, then the weights of other assets need to be adjusted to keep the overall risk constant, meaning reducing equity weights and increasing bond exposure.
Whilst also discussing product areas, listing the few exceptions and discussing the fallacy of filling up pension allocation before looking at venture capital.
Andrew Aldridge, Partner & Head of Marketing at Deepbridge Capital, commented:
“Those of us in the venture capital sector have long-known the significant potential returns available with Enterprise Investment Scheme investments, but to have a highly-regarded analyst and actuary articulate the potential impact of exposing investors to such products is significant. Of course, EIS investments may not be suitable for everyone but in reality, this report suggests that advisers should be explaining why they are not including EIS or VCT within a portfolio rather than having to justify their inclusion. For many advisers this consideration will turn the inclusion of such products on its head.
“Financial advisers often ask us about the risk ratings of EIS funds, with the simple answer being that they are of course high risk. However, advisers should be considering the risk profile of their clients’ overall portfolio rather than on a fund by fund basis. The IFAs we work with, who use EIS routinely, certainly understand this and will not be surprised in the slightest by the outcomes of this paper. With EIS investing increasingly common amongst IFAs, this report is a welcome statement to reinforce their appeal.
“This report shows the compound impact of growth and the tax advantages available via EIS, which we believe highlights the need for EIS investments to deploy capital expeditiously; with Deepbridge’s EIS funds typically fully deploy capital within a month of subscription.”
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