Specialised Investments Simplified

Empowering Financial Advisers with Clear Insights and Tailored Investment Strategies

Hello and welcome to the August edition of We Complement’s Specialised Investments Simplified newsletter, thoughtfully written by our very own Lucy Wylde .

At We Complement, we understand the important role you play in guiding your clients through often complex investments. We’re here to make that journey a little easier for you, offering clear, practical insights that you can share with confidence. Whether it’s helping your clients navigate inheritance tax, uncovering opportunities in AIM portfolios, or exploring the exciting potential of Venture Capital Trusts, our goal is to arm you with the knowledge and tools to better serve your clients and support them in reaching their financial goals.

Continuing the trend for the 2024/25 tax year, Inheritance Tax (IHT) continues to raise a significant level of revenue for the government. Data published by HM Revenue and Customs (HMRC) on the 19th of July 2024 show that between April and June of this tax year, inheritance tax receipts hit ￡2.1 billion. This figure is ￡83 million higher than the same period last tax year.

Although omitted from Labour’s manifesto, it does feel like Inheritance Tax would be an obvious target for the new Chancellor to raise the ￡22 billion required to cover unfunded pledges inherited from the previous government.

However, while there have long been calls for reform to the system, it now seems increasingly unlikely that any major overhaul will happen. Of the changes that may be made, it appears unlikely that they will benefit ‘the many.’

In particular, there have been reports that the new government may abolish the current reliefs for farms and businesses, which enable either 100% or 50% of certain businesses and business assets to qualify for IHT exemptions under Business Relief. This would also impact investors with qualifying AIM-listed shares, which, after two years of ownership, also qualify for 100% IHT exemption.

Of course, this is all speculation at present, as the new government’s actual plans will not be revealed in full until Labour’s first Budget on Wednesday, the 30th of October.

With the above in mind, we have taken a look back at the Q2 2024 performance of the Rathbones I W & I AIM Portfolio IHT Plan and look forward to the launch of the Foresight Technology Venture Capital Trust (VCT) PLC.

Rathbones I W & I AIM Portfolio IHT Plan

Having recently become part of the Rathbones Group Plc, Investec Wealth & Investment (UK) now manages over ￡1 billion in assets, including those under Rathbones.

Individually, as of the end of June 2024, Investec Wealth & Investment (UK) managed just under ￡750 million of assets for clients purely in AIM IHT accounts.

According to the Q2 2024 performance update published on the 1st of August 2024, the Rathbones I W & I AIM Portfolio IHT Plan net 12-month return (on a rolling quarter-by-quarter basis) is 5.1% over the last 10 years.

In terms of the estimated revenue split for the portfolio, as of the 30th of June 2024, the UK has a 44% revenue exposure. This was reduced from approximately 50% as more global companies were introduced into the portfolio. While revenue in the UK has decreased, there are 10 companies within the Rathbones I W & I AIM Portfolio IHT Plan where over 80% of revenues are derived domestically.

From a market capitalization point of view, nearly 50% of the companies in the portfolio have a market cap above ￡500 million, with the average weighted market cap at ￡516 million. This aligns with Investec Wealth & Investment (UK)’s investment philosophy of quality, where many companies that meet their investment criteria are well-established and have grown into sizable companies.

The dividend yield at the end of the second quarter of 2024 was 1.7%.

Turning to performance, it was another strong quarter. Quarter 2 of 2024 closed with the cumulative performance of the portfolio up by 4.6%, compared to both the FTSE AIM All-Share Index at 3.5% and the FTSE All-Share Index at 3.7%. This continues the trend of the Rathbones I W & I AIM Portfolio IHT Plan outperforming the FTSE AIM All-Share Index over the past 1, 3, 5, and 10-year periods.

In connection with the above, the top three contributing companies during Q2 2024 were Keywords Studios PLC, followed by Alpha Financial Markets Consulting PLC and Lok’nStore Group PLC.

The panel and market research business, YouGov, was the worst performer, costing the portfolio 0.230 basis points (bps) of performance in the second quarter of 2024, due to an overweight asset allocation compared to the index.

Foresight Technology VCT PLC

Over the past three years, total fundraising into Venture Capital Trusts has exceeded ￡3 billion.

Managed by Foresight Group LLP, the Foresight Technology VCT PLC is the only VCT with a focus on deep technology.

Deep technology refers specifically to companies that solve significant, high-value problems through scientific or engineering breakthroughs. This is a sector that has consistently delivered strong returns, with these types of companies making up 25% of all so-called unicorn exits (startup companies with values exceeding $1 billion USD) within the last year.

Foresight Technology VCT PLC consists of one share class, the FWT Share class, which intends to invest principally in early-stage UK technology companies.

After originally raising ￡37.8 million through an Ordinary Share issue in 2010/2011 and 2011/2012, the Foresight Technology VCT PLC subsequently issued the “C” shares fund of ￡13.1 million and a “D” shares fund of ￡5.6 million. However, on the 29th of June 2018, the C and D shares funds were merged with the Ordinary Shares fund, which was then merged with the FWT Share class just over five years later.

As of the 31st of March 2024, the number of FWT Shares in issue was 32,445,165, with investments made into 30 companies totaling ￡20.2 million. The Net Asset Value (NAV) per share at this time was 98.8p.

So far, the strategy's first two exits, Codeplay and Flusso, have generated returns of 16 times and 3 times the capital invested, respectively.

The Foresight Technology VCT PLC, which is currently closed to new investors, aims to target UK unquoted companies that it believes will achieve the objective of producing attractive returns for shareholders.

A further launch is planned for mid-September of this year.

As you close out this month’s newsletter, we hope you’re walking away with fresh insights. At We Complement, we’re more than just a resource—we’re your partner in helping your clients achieve their goals. We know that every client is unique, and we’re here to help you tailor investment strategies that not only meet their needs but also reflect their aspirations. Whether your clients are looking to optimise their tax planning, diversify their investments, or explore new financial opportunities, we’re right here with you, ready to support your efforts. If you’re looking for more personalised guidance or have any questions, don’t hesitate to get in touch with us. Let’s work together to simplify the complexities of specialised investments and make a real difference in your clients’ financial lives.