Baronsmead VCT 4 poised for £30m close

Baronsmead VCT 4, one of a number of venture capital trusts managed by UK mid-market investor ISIS Equity Partners, has raised £27.5m on its way to a £30m target.

ISIS Equity Partners says it is “coming down the final straight” as it seeks to close its Baronsmead VCT 4 venture capital trust vehicle on £30 million (€45 million; $54 million).  

David Thorp, chairman of ISIS Equity Partners, said the fundraising has been given momentum by Chancellor Gordon Brown’s decision to abolish capital gains tax deferral for VCT investment after the end of the tax year on 5 April 2004. “I suspect that most people currently investing are doing so because this is one of the last opportunities they have to defer capital gains tax,” he said.

Launched in December 2001, Baronsmead VCT 4 raised £19 million gross in the 2001/02 tax year, £2 million gross in the 2002/03 tax year, and has so far raised £6.5 million gross in the current tax year. It is hoping to reach a capped target of £30 million by 5 April.

Despite the abolition of CGT deferral – which Thorp says was probably the most important reason for investing for around half of VCT shareholders – the market has drawn some encouragement from the Chancellor’s Budget statement earlier in the month. It was announced that higher rate taxpayers will for the next two tax years receive 40 pence income tax relief for every £1 invested in a VCT, doubling the rate currently available. In addition, the total amount that can be invested in any one year was doubled to £200,000.

Fundraising in the VCT market has reflected the peaks and troughs of the technology sector, in which the majority of VCT money is invested. In 2000/01, VCTs raised £450 million, falling to £50 million in 2002/03 and an estimated £40 million for the current tax year.

Baronsmead VCT 4 has paid dividends of 3.2 pence per share to date, creating a total return since launch of 5.2 percent. Over the same period to March 1 2004, the FTSE All Share Index had fallen by 2.1 percent. The trust is one of six managed by ISIS Asset Management Group, which is the largest VCT manager with combined net assets of approximately £190 million.