A Couple of Problem VCTs – Foresight 4 and Edge Performance

Some Venture Capital Trusts (VCTs) have been great at delivering decent total returns (and tax free dividends) for investors over the years. But others have demonstrated very poor performance which often has not even compensated for the initial tax benefits. This frequently results in mergers, restructurings, changes of manager or changes of directors to mollify disgruntled shareholders.

Foresight 4 VCT Plc is one example of a patchy history where Foresight took over fund management of VCTs that got into some difficulties. But that has not resolved all the problems – for example, there was another substantial decline in the Net Asset Value last year. Some investors, supported by ShareSoc, are now calling for changes to the board.

Specifically they are asking for shareholders in the company to vote against the re-election of all the directors, and against other resolutions, at the AGM on the 30th September. If you are a shareholder in this company, please read the note that is now available on this web page for further information: http://www.sharesoc.org/foresight4.html

Another example is the Edge Performance VCT which is a VCT structured in a rather odd way with multiple separate funds in separate share classes. It was intended that each share class would wind-up after 5 years but as that seemed unlikely to be practical they are merging multiple share classes (and without a shareholder vote). As part of the consolidation it was proposed to raise the cap on expenses, and there was perhaps an unintended consequence that the manager’s performance fee would effectively be rebased as a result.

There is a report of the AGM of Edge on the 25th August available to ShareSoc Members by Mark Lauber (a ShareSoc director who holds the shares). It does not make for happy reading. However subsequently the company addressed the issue of rebasing the performance fee by waiving the performance fee altogether on the consolidation shares. They said that “following a constructive dialogue with shareholders on the restructuring of the Company’s six planned exit share classes into a consolidated single I share class, and discussions with the Company’s investment manager, it has decided to remove the carried interest in the I shares’ fee structure.”

Hopefully this will improve the relationship with shareholders, but this writer still takes a sceptical view of the prospects for this VCT based on the current portfolio content and past record.

Roger Lawson

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One thought on “A Couple of Problem VCTs – Foresight 4 and Edge Performance

  1. Update 12/09/2016. Note that subsequent to the above, Foresight 4 VCT and Foresight 3 VCT announced that they had entered into discussions on a merger with the intention of achieving cost savings from the establishment of a single, enlarged VCT (with Foresight 4 forming the legal base). That is likely to result in changes to the board of Foresight 4 but it may not resolve all of the issues raised in the aforementioned letter and Foresight 3 has similar problems.
    Roger Lawson

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