ONSIDE / INTERVIEW
when calculating returns is wrong – HMRC give that not
the EIS provider! People have differing views on what they
expect. In our view a return of 15% pa over circa 4 years
is consistent with an equity investment in a small private
limited company and that is what we expect to produce
otherwise the risk/reward ratio is skewed somewhere along
the line.
We also align our costs for running the service very much
alongside the investors. Without getting bogged down here,
basically we get investors at least their original £1 back
before we charge any annual management charges and then
look to share the upside afterwards. The better we do for
investors then the more we benefit too, which is a theme
through all our products and services.
What type of companies will investors hold in
their portfolio?
It will be a mix of some Private Limited companies and
some companies which are quoted on the Stock Exchange
(AIM). Sector wise, it will be a decent spread across the
4-6 companies in each portfolio and there will probably be
some biotech presence given our strength of relationships in
that sector.
Generally speaking, we look for more established businesses
in which to invest from our Portfolio Service where revenues
and profits may be much more visible than might be the case
with earlier stage or start up businesses.
So how do Acceleris, a Seneca subsidiary
company, feature in the EIS offering?
Acceleris have operated in the EIS arena for 15 years or
more and have advised well over 60 companies during this
time. Their specialism is in earlier stage companies whereas
the Portfolio Service deals generally with more established
businesses. Acceleris also have a following of high net worth
investors who prefer a single company approach where they
can make the investment decision themselves rather than a
discretionary portfolio service, where investors entrust the
investment selection and management to us.
a logical path in the right circumstances and indeed Redx
Pharma would be a great example having been nurtured
from a start-up, through several years of development and
multiple funding rounds with Acceleris, later receiving
funding via the EIS Portfolio Service culminating in an IPO
on the Alternative Investment Market (AIM) early in 2015.
Is there a time in the year when it is best to
make EIS Investments?
In past years there was a seasonality to it and most investors
tended to make their move in the last couple of months of the
tax year in order to carry back for tax purposes. That tends less
and less to be the case now and EIS has become so mainstream
that investors see it as an all year round consideration.
Certainly for us, as a Portfolio Service, we admit new investors
pretty well every week of the year and to give investors 4-6
investments will probably take around 8 months. Investors
tend to prefer a diverse spread of good investments more so
than getting their tax certificates immediately.
So go on then Ian, tell us the ones to watch in
the Portfolio.
I don’t want to jinx any! But seriously, it goes back to what I
said at the beginning. We would never put investor cash into
anything if we didn’t think it could do the job we wanted it
to and our investment processes are there for that reason.
We have had no casualties and all our EIS investments are
trading in line with expectations at the time of talking to you
but sooner or later something could wobble because these
are equity investments in smaller companies. The risks are
greater which is why tax reliefs are available in recognition. It
is also why we go for a diversified portfolio approach so that
if something does struggle then the whole EIS investment is
not at risk as is the case with single investments.
Let’s just say we have EIS investee companies which are now
quoted on AIM and we are pretty happy with things so far!
It is entirely possible however, that a business which starts
it’s life under the wing of Acceleris, obtains its funding
through Acceleris , continues to develop and then becomes
a candidate for the Seneca Portfolio Service. That would be
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