Albion Capital, a UK-based firm which invests in venture capital, has completed the top-up offers across its six venture capital trusts. 

UK-based Albion Capital said last week it has raised £80 million ($100 million) to boost growth within its existing venture capital trust (VCT) portfolios of around 60 businesses. Separately, industry data shows capital-raising for VCTs has been robust in recent months. Capital provided by VCTs allows early-stage companies to innovate and contribute to the UK economy and these tax-advantaged structures have existed since the mid-1990s.

Albion Capital is a thematic investor, focused on four themes: Fintech, health tech, digital security, AI and data. 

The companies supported by the six Albion VCTs include 15 healthcare and technology companies which the firm said grew their combined forecasted revenue by 63 per cent to a total of over £275 million in the last year. 

The company said that this fundraise, supported by both existing and new shareholders, will enable it to continue investing across its portfolio of high-growth software, healthcare (including health tech) and mission tech-enabled services.

Will Fraser-Allen, managing partner at Albion Capital, said: “VCTs play an important role bringing British innovation to life and supporting entrepreneurs on their growth journey. This results in positive economic and social benefits for the UK and valuable returns for patient VCT investors. This has been recently demonstrated by one of our companies, Quantexa, completing a funding round at a £1.4 billion valuation,” he said.

Quantexa uses AI to provide a connected view of data in a single place. It has just completed a £104 million funding round, led by Singapore’s sovereign wealth fund GIC with participation from existing investors including Albion. With financial and digital crime on the rise, Quantexa’s approach provides clients, from corporations to governments, with the tools to tackle these, the firm said. Albion also invests in Seldon, a data-centric machine-learning operations platform, which has just secured £16.5 million in Series B funding.

“Given the ongoing global economic and geopolitical challenges, we believe that the funding provided by VCTs is more important than ever and this well-supported fundraise makes it possible to continue backing talented entrepreneurs to accelerate growth,” Fraser-Allen said.

VCTs carry reliefs for income, capital gains and inheritance tax, depending on holding periods for the investment and other conditions. They're a way for mass-affluent investors to tap into the kind of start-up, venture capital investments that are usually the preserve of wealthy individuals and institutions. VCTs were introduced in 1995 by the Conservative government of that time in the UK. Occasionally, independent investment advisors have complained that more should be done by the industry and government to promote and encourage investment into VCTs, subject to certain risk warnings.

Performance
On performance, Albion Capital said its VCTs returned an average annual return of 8.4 per year over the 10 years to 30 September 2022 – 9 per cent annually over 5 years and 6.3 per cent annually over 3 years, excluding tax relief. “All six VCTs have an annual dividend target of around 5 per cent of net asset value and our strategy has delivered over target,” he said at a media briefing last week.

The firm made 15 investments in 2022, compared with only five in 2021, when the market was more expensive. Nevertheless, with the difficult market conditions recently, the fundraise took a lot longer this time compared with the last fundraising round, he added.  

VCTs hit high
AIC figures released this week also show that the amount invested in Venture Capital Trusts hit more than £1 billion in 2022/23. Alex Davies, founder and CEO of Wealth Club, said: “Despite the economic uncertainty and a slower start, this marks yet another extraordinary year for Venture Capital Trusts.”
 
“It’s easy to see why VCTs remain attractive. If you are a wealthier investor, you’re caught between higher taxes on one hand and restrictions on where you can invest on the other,” he added. “Taxes are at a 70-year high and traditional investments like pensions and buy-to-let have been squeezed. Venture Capital Trusts stand out. They’re simple and highly tax efficient for a start. But it’s not just about saving tax, VCTs are also exciting: you’re backing some of Britain’s youngest and brightest companies and, probably adding something completely different to your portfolio,” he said.
  
“2023/24 is going to be a brutal year for UK taxpayers. 232,000 more people will be paying the top rate of tax. Meanwhile both the dividend and capital gains tax allowances are being slashed. For many wealthier people it will feel like a return to the 1970s. VCTs therefore will remain very popular,” he continued.

He cited Albion VCTs £80 million raise as one of the biggest. Established in 1996, Albion Capital, an investment firm, has more than 20 years of experience in investing in early-stage technology companies, providing investors with access, via investment in its managed funds, to enduring innovative businesses built by talented entrepreneurs. It has funds of about £1 billion under investment management or administration, regulated by the Financial Conduct Authority.