Investors toast Virgin Wines launch as share prices sparkle 

Investors in the Mobeus venture capital trusts raised a glass to the managers this week as the stock market launch of Virgin Wines sent the trusts’ shares fizzing.

The firm runs four VCTs, all of which have a stake in the online wine merchant, which ended  16pc higher on Tuesday from a placing price of 197p to a close of 228p.

According to the most recent fact sheets, Virgin Wines was the largest holding in Mobeus Income & Growth 2 VCT and The Income & Growth VCT and the second largest position in Mobeus Income & Growth and Mobeus Income & Growth 4. Shares in three of the four portfolios rose by more than 10pc yesterday.

Although Mobeus is not raising money this year, investors have been quick to snap up the top-performing VCTs that are raising cash in a bid to shield their cash from the taxman before the April deadline.

Alex Davies of the Wealth Club, a specialist VCT broker, said: "Whilst there is still some capacity, it is filling up very fast with many of the big names already closed.  Baronsmead closed on Tuesday, while Octopus Titan and British Smaller companies are likely to close before the end of  the week."

VCT sales this year now stand at £470m, up 6.8pc from the £440m at the same point last tax year, when demand dropped as investors shied away from the risky portfolios at the start of the pandemic.

"As VCTs only issue a limited number of shares under each offer, if you find one you like, you should act now whilst capacity is available. Often investors leave it until the end of the tax year and find that the VCTs they wanted to invest in are no longer open," said Mr Davies.

VCTs have long been a favourite of wealthy investors, who are given generous tax relief by the government. Investors receive up to 30pc in income tax relief on their initial investment, which could be as much as £60,000 if the full VCT allowance of £200,000 is used. 

Dividends and capital gains are also tax free, although investors must keep their cash in the trusts for a minimum of five years.

However, last year it was their performance that caught the eye. The 20 largest VCTs made an average return of 8.4pc, the highest since 2013. Relative to the British market, they had their best year in more than a decade, beating the FTSE All Share index by 18 percentage points.

Since 2015 the types of companies VCTs can invest in has gradually been restricted, forcing them to target riskier businesses at an earlier stage in their development. Some focus on companies listed on the junior Alternative Investment Market while others also hold private, "unquoted" companies.

Mr Davies said these changes had proved "the making of VCTs" by leading them to invest in "fast-growing technology-enabled businesses, the types that have seen their fortunes prosper rather than diminish as a result of the pandemic". Virgin Wines was a good example of this.

With many trusts already at capacity, Jason Hollands of Tilney, the broker, said that out of the those likely to have any space left by the weekend, his top pick was the £114m Pembroke VCT. The firm owns the likes of nut milk drinks brand Plenish, the Five Guys British franchise and designer shoe firm Kat Maconie. 

"My secondary pick is £155m Octopus Apollo which, unlike its £957m larger sibling Octopus Titan, focuses on business at the more mature end of the VCT investment spectrum," he added.