The first venture capital trust focused on the AIM market in 17 years has been launched by Puma, despite fears over the strength of London’s junior market.
AIM stocks have not performed well in recent years, with its index falling 40 per cent over the last three years, compared to a 21 rise in the FTSE All Share and a one per cent rise for the FTSE Smallcap, excluding investment trusts.
Meanwhile, the VCT launch comes following rumours this week, that the Chancellor is weighing up scrapping the inheritance tax break on AIM stocks, with the Puma team stating it was something they will “closely monitor but remain confident in the long-term outlook for the AIM market”.
So with the uncertainty around tax breaks and with AIM stocks continuing to suffer, why launch a VCT targeted at the stocks?
One key reason has been the extension of the sunset clause for VCT income tax relief to 2035, which was approved by the EU recently and a UK Treasury Order gave effect to the clause in the UK, which Puma described as a “significant positive signal for the VCT community”.
“Also, an improving economic climate resulting in a strong appetite for companies to launch on AIM, therefore puts us in a positive position to deploy capital to support the management teams of a broad range of growth companies at favourable valuations,” the team said.
Another, key reason to launch a VCT now is the significant tax incentives the vehicle offers. VCT investors receive 30 per cent upfront income tax relief up for up to £200,000 per year, along with tax-free dividends and capital gains on the sale of shares.
Puma also reported seeing strong demand from the adviser and wealth management community.
The fund house has a long track record with the AIM market, with its PUMA AIM IHT portfolio more than doubling in value over the last decade.
Since launching in 2004, Puma VCTs have raised more than £380m in total, and the team has a collective track record of over 50 years investing in AIM.
“Puma Investments grew out of the Shore Capital Group, the third largest market maker on AIM with close to 40 years of trading in the UK public markets. As a business, we are proud of the long track record we have in supporting so many SMEs’ growth journeys,” said David Kaye, CEO of Puma.