Fees

VCT FEES

The fees applied in a VCT can vary depending on the specific VCT and its fund manager. However, there are some typical fees that investors may encounter. These fees may include:

Management Fee: This fee is charged by the fund manager for managing the VCT’s investments. It is usually calculated as a percentage of the total assets under management and is typically charged annually.

Performance Fee: Some VCTs may charge a performance fee, also known as carried interest. This fee is typically a percentage of the VCT’s profits above a certain threshold. It is designed to align the interests of the fund manager with the investors by incentivising them to generate positive returns.

Initial Charge: An initial charge may be applied when investors initially invest in the VCT. This charge is deducted from the amount invested and is typically a percentage of the investment.

Annual Administration Fee: This fee covers the administrative costs associated with running the VCT, such as legal and accounting expenses. It is usually calculated as a percentage of the NAV and is charged annually.

Other Expenses: VCTs may also incur other expenses, such as custodian fees, audit fees, and marketing expenses. These expenses are typically borne by the VCT and may indirectly impact the returns to investors.

Investee company charges: Whether borrowing money or raising venture capital, there is almost always a cost of capital to companies raising. This could be described as a due diligence fee, a fundraising fee, a cost-of-legals fee or an ongoing management or board seat fee. Whether such fees represent value for money will depend on the investment style and support provided by the respective manager, and may be difficult to judge.

It is important to carefully review the documents and prospectus of a VCT or EIS fund, in order to understand the specific fees and charges that apply. Please note that not all fees charged to investee companies will necessarily be disclosed. These fees can impact the overall return on investment, so it’s advisable to consider them alongside other factors when evaluating an opportunity.

Consider this

We recommend understanding what the fees are as well as how they are applied. There are three ways fees can be applied:

1. Charged to the investor pre-deployment.
2. Charged to the investee company post-deployment.
3. Charged to both investors and investee companies (points 1 and 2).

The fee structure applied impacts the tax reliefs available if charged pre-deployment, but it could be equally as important to understand what fees are charged to investee companies. Providers are not required to disclose fees to the investee company post-deployment unless prompted, and this may be difficult to access.

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IMPORTANT: The views expressed in these webinars are the views of the individual and not necessarily of Deepbridge Capital LLP. Figures quoted by the presenter and/or guest may be approximations. The content of these videos should not be construed as financial advice. This video is a real-time financial promotion and, as a result, has not been approved as a financial promotion for the purposes of Section 21 of the Financial Services and Markets Act 2000.

RISK WARNING: Any decision to invest should be made only on the basis of the relevant documentation for the investment available in the accompanying company profile. Investments in unquoted companies carry high risks. Capital invested will be at risk and you could lose all of your investment. No established market exists for the trading of shares in private companies, making it difficult to sell shares.

Tax treatment depends on the individual circumstances of each investor and may be subject to change in future. The availability of tax reliefs depends on the Company invested in maintaining its qualifying status. Past performance is not a reliable indicator of future performance.

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