With valuations lower than before, it is now a good time to invest in Venture Capital Trusts, according to Will Fraser-Allen, managing partner of Albion Capital.
Earlier this year VCT investment manager Albion Capital launched its latest £60mn fundraise through top up offers across five of its six venture capital trusts.
Fraser-Allen said: “There was a very buoyant market in the pandemic, in 2021-22 there was a real boom in venture.
“Then the amount coming into the venture space dropped quite sharply.”
Fraser-Allen said despite a drop in investment, VCTs have done better than the wider venture industry.
Figures from the Association of Investment Companies showed there was a 28 per cent decrease in cash invested in VCTs in 2023 compared with the year before, while the wider venture capital industry suffered a 46 per cent decline.
Fraser-Allen said: “VCTs are a good long-term investment vehicle, they invest through the cycles so you are able to smooth out cycles, which you can’t do in a fund.
“We know we’re going into 2024 with valuations down compared to where they were pre–pandemic which suggests to me it is not a bad time to be investing in venture capital.
“For those that do choose to invest now it is a good entry point, valuations probably aren’t going to come rushing back."
Albion’s two core themes are B2B and health technology.
Fraser-Allen said the firm is now in the early stages of building a climate tech theme.
“Everybody in the team is encouraged to develop thematic ideas.
“They are tasked with researching and building an investment case and will map out every company in the space.”
And when it comes to artificial intelligence, Fraser-Allen said all companies in the portfolio are looking at how they can use AI to improve their products.
Richard Stone, chief executive of the Association of Investment Companies said in the face of challenging investment conditions, VCTs held up better than the broader venture capital industry.
He added: “VCTs have many advantages for investors, including attractive tax benefits and good long-term performance, and their investee companies create jobs and social benefits for local communities across the UK.
“These advantages help to shore up capital raising in difficult economic conditions and give VCT managers confidence to continue investing in tough times, when other venture capital investors are pulling back.”
tara.o'connor@ft.com
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