European private equity firm Electra Partners has launched Electra Kingsway VCT 2 Plc, a generalist venture capital trust aiming to raise £40 million for investment in established, typically cash flow positive growth companies in the UK.
It is the second time that Electra, whose core business is to invest in buyouts at the upper end of the European mid-market, raises money through a VCT structure.
According to a press release, Electra Kingsway VCT 1, a £25 million structure formed in 2001, has generated a total return of 25 percent since launch, or 49 percent inclusive of the trust’s 20 percent income tax break.
VCT 2’s tax benefits will be even more attractive than those of VCT 1. The benefits include income tax relief of 40 percent of the amount subscribed; tax free dividends and capital distributions and capital gains tax exemption on disposal of shares and. Investors can invest up to £200,000 per year.
Nick Ross, a director at Electra, said in an interview that the tax breaks available to investors in VCTs meant that generating a very attractive return would not be difficult. If VCT 2 generated a return of 20 pence on each pound invested, Ross said, the 40 percent income tax relief meant the investor would in effect achieve a total return 60 pence.
Members of Electra’s investment team have committed to invest over £300,000 in the structure, according to a press statement.