Former Bestinvest chief investment officer Graham Frost is backing the launch of a new discretionary manager specialising in venture capital trusts (VCTs) and enterprise investment schemes (EIS).
Frost, who left Bestinvest in May 2012 after a major strategic review, has come on board at The Venture Capital Platform, and is being joined by former Matrix Alternative Asset Management chief investment officer Stuart Ratcliff.
The business is the brainchild of VCT specialist and ex-Origen Financial Services wealth solutions manager Jeremy Spencer and the new investment house will design discretionary portfolios solely populated with VCTs, EIS and seed EIS in what Spencer describes as ‘the acceptable face of tax planning’.
Ratcliffe, Frost and Spencer will work together on the investment committee.
The Venture Capital Platform has been designed to address wealth managers’ concerns that VCT providers have not provided clarity on their post-retail distribution review (RDR) charging structure.
In December, Wealth Manager revealed that most VCT providers had yet to come out with clean charging structures, meaning advised clients are still paying the same for the product as clients of execution-only brokers – with the latter able to take trail commission post-RDR.
This has led to fears there is an unlevel play field for clients investing in VCTs, with advised clients essentially subsidising non-advised clients’ rebates.
Spencer explained his portfolios will rebate trail commission to clients, making for a more competitive way of investing in VCTs.
‘It solves the RDR issues surrounding VCTs because we can pay any agreed initial and ongoing remuneration to the adviser from the client account; funded, at least in part, by the fund manager rebates,’ Spencer explained.
‘We will invest in whichever share classes give the client the best deal and then negotiate rebates from the managers’.
Spencer expects the service will primarily appeal to intermediaries who looking to invest in tax-efficient structures but are unwilling to undertake all the due diligence on VCTs and EIS themselves.
‘Many IFAs are uncomfortable building portfolios of VCTs and EIS and if they don’t do enough of volume, it may not be commercially worthwhile taking in to account the amount of due diligence required’ he explained.
Charges for the service are yet to be decided, although Spencer admits it will be more expensive than a traditional multi-asset discretionary portfolio due to the costly nature of the underlying investments.