The age of the average VCT investor has dropped11years since 2017, according to new data.
Data gathered by the Venture Capital Trust Association showed theaverage age of the current VCT investor is 56, down from 67 in 2017.
But investors are not making the most of the tax efficient vehicles.Currently half of all investors have less than £15,000 in the products, generatingbelow £4,500 in tax relief, the VCTA said.
The data was collected from 2,237 investors in January this year.
VCTs offer investors tax relief of up to 30 per cent of their investment on the first £200,000 invested each year, and dividends and capital gains are also tax-free.
The lack of wider traction islikely due to a combination of lack ofawareness, understanding and knowledge.David Hall
David Hall, managing director of YFM Equity Partnersand chairman of the VCTA, said the drop in age was a good thing as the underlying investment was long-term.
“Investing in your mid-50s allows plenty of time for those assets in which you are investing to mature,” he said.
VCTs have become increasingly popular in recent years due to the generous tax breaks, as well as the income potential they offer in a yield-starved market.
Between April 6 and early January this year£580m wasinvested in VCTswith more than three months of the tax year remaining. Thiscomparedwith £256m in the previous tax year, according to Wealth Club.
But of the 30mn taxpayers in the UK with long-term investment needs, VCTs are still a very small part, Hall said.
“[The lack of wider traction is] likely due to a combination of [lack of] awareness, understanding and knowledge.”
These were compounded by a nervousness to invest in illiquid markets, he added.
“Advisers do play their part [in raising awareness] and whilst illiquidity is a factor in each individual underlying investment, many trusts and portfolios have in excess of 50 investments allowing this risk to be mitigated through diversification.”
Hall added VCTs werein the midst of a “Goldilocks” balance of regulation and incentives.
“If it is just right, it appeals across the spectrum of tax payers where each can invest according to ability. This makes it universal and progressive and it is a great design.
“It is a real positive if VCTs can help play a part in this whilst also providing investment to the small innovative businesses that are the engine of economic growth.”
Last month Octopus Investments launched its first VCT in 10 years, offering investors an initial £20mn in sharesto back innovative companies with a sustainability focus.
The 'Future Generations' VCT will invest in early-stage firms that are disrupting industries and ‘driving positive outcomes’ for the planet and society.
It will be managed by Simon King, a partner in Octopus Ventures, and the investment team behind Octopus's £1.3bn flagship Titan VCT.
The fund will align investments to three themes: ‘building a more sustainable planet’, empowering people, and revitalising healthcare.
sally.hickey@ft.com
FAQs
Once favoured by older, wealthier investors, recent data from the Venture Capital Trust Association showed the average age of the current VCT investor is down from 67 (2017) to 56 (2022) (FT Adviser, February 2022).
What is the average age of investors? ›
The average age when a person starts investing is 33.3, according to a 2021 study by robo-advisor Personal Capital. According to a 2021 study by Charles Schwab, 15 percent of all investors got their start in 2020.
What happens to VCT after 5 years? ›
VCTs are long term investments. Investors must hold VCT shares for at least five years to benefit from tax relief (if shares are sold before then, any upfront income tax relief that has been claimed must be repaid).
What is the success rate of a VC portfolio? ›
Raising money from a Venture Capital (VC) firm is extremely challenging. The odds of receiving an equity check from Andreessen Horowitz is just 0.7% (see below), and the chances of your startup being successful after that are only 8%. Combined, that's a 0.05% or 1 in 2000 success rate. Image data source.
What percentage do investors expect in return? ›
Expectations for return from the stock market
Most investors would view an average annual rate of return of 10% or more as a good ROI for long-term investments in the stock market. However, keep in mind that this is an average. Some years will deliver lower returns -- perhaps even negative returns.
What is the 70 rule for investors? ›
Basically, the rule says real estate investors should pay no more than 70% of a property's after-repair value (ARV) minus the cost of the repairs necessary to renovate the home. The ARV of a property is the amount a home could sell for after flippers renovate it.
Who is the 10 year old investor? ›
His Return? Over 5,000%. Jaydyn Carr of San Antonio made $3,200 on shares from GameStop this week that his mother bought him in 2019 for about $60.
What is the 5 year rule for VCT? ›
You can invest up to £200,000 in VCTs per tax year, and receive tax relief of up to £60,000. To benefit, you must have paid or owe as much tax during the tax year in which you invest. To keep the relief, you must hold the investment for at least five years.
What is the average VCT return? ›
Last week, AIC data showed the average VCT was down 5 per cent in 2023. However, over the longer term VCTs have performed better, with total returns of 22 per cent and 85 per cent over the past five and 10 years respectively.
Should you sell VCT after 5 years? ›
Investments in VCTs are exempt from Capital Gains Tax (CGT). This means that, if you decide to sell your shares in a VCT (after the 5-year holding period), you won't have to pay any CGT on these shares.
The failure rate of venture capital-backed companies is high, with estimates ranging from 50% to 90%.
What percent of VC funds fail? ›
And yet, despite all that cash flowing into VC-backed companies, twenty-five to thirty percent of them will fail. One in five fail by the end of their first year; only thirty percent will survive more than ten years.
What is a good return for an angel investor? ›
While it varies depending on the individual investor, the average return for an angel investor is thought to be around 20%. Of course, there are always exceptions to this rule and some angel investors have made a lot more (or a lot less) money from their investments.
How much money do I need to invest to make $1000 a month? ›
A stock portfolio focused on dividends can generate $1,000 per month or more in perpetual passive income, Mircea Iosif wrote on Medium. “For example, at a 4% dividend yield, you would need a portfolio worth $300,000.
Is investing at 25 too late? ›
No matter how old you are, the best time to start investing was a while ago. But it's never too late to do something. Just make sure the decisions you make are the right ones for your age—your investment approach should age with you.
What percent of 26 35 year olds invest in the stock market? ›
Older millennials are far more likely to invest than their younger counterparts. Bankrate found that 44% of those between the ages of 26 and 35 say they currently have money in stocks, either directly or indirectly.
Is 27 too old to invest? ›
While investing when you are younger gives you an advantage, it is never too late to get started. Those over 50 can utilize catch-up contributions for their retirement accounts. This allows them to save more, which can help make up for years they didn't save enough.
Is 25 too old to start investing? ›
Starting early is a major advantage.
In your 20s, and even your 30s, your biggest asset is time. Even when you're just investing in retirement savings, nothing can make up for the effect of compound interest. Also, if you lose money in the market, you'll have more time to make it back before you need it.
The lack of wider traction islikely due to a combination of lack ofawareness, understanding and knowledge.David Hall