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Asset management firm Octopus has launched an investment vehicle aiming to exploit opportunities in the secondary market for VCTs. The Octopus VCT Portfolio Service will target an average total return of ten per cent by investing in the shares of existing VCTs.

The fund, which is seeking up to £10 million this tax year, will invest in up to 15 mature VCTs, some of which may come from Octopus’ own stable. It may invest in both generalist and AIM VCTs, and will be managed by Octopus director Chris Hulatt.

Says Hulatt: ‘Many VCTs are now reaching maturity and are demonstrating that they have the ability to deliver a consistent dividend stream in excess of seven per cent per annum.’

Hulatt will favour VCT shares that are trading at a substantial discount to their net asset value. Significant discounts are common to VCTs given that certain tax advantages are available only to purchasers of new shares.

Other criteria for selection include the quality of underlying investments, fund managers’ track records and an ability to demonstrate consistent delivery of significant dividends.

The targeted ten per cent return is expected to include annual tax-free income of at least six per cent after charges (equivalent to income of more than ten per cent for a higher-rate taxpayer). The minimum investment in the service is £30,000.

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