By the nature of what we do as tax-efficient investment managers, we face a constant balancing act. We have to ensure that we have enough investment coming in, via our adviser community, to fulfil the funding requirements of our investee companies, yet we also have to ensure that we have enough capacity to satisfy investor demand.
We see this balancing act as being a fundamental part of our business and our raison d’être. It therefore surprises me somewhat when advisers tell me that other managers are not able to confirm that they will be able to deploy funds within this tax year. I appreciate this is partly sales talk in order to create an unnecessary sense of urgency but at the same time I would be wondering what exactly they are doing if they are unable to commit to this fundamental.
Working closely with academia, science parks, funding specialists, Government-supported agencies, networks of innovators and independent advisers there is constantly a number of companies looking for funding via EIS and SEIS. This is especially true in our focal sectors of technology and life sciences, the trick for us is finding those that meet our criteria.
We obviously always retain the right to not accept funds if necessary, but we are always working to ensure we have the pipeline of capacity to deploy investors’ money. We are already well advanced with our pipeline of investee companies for the 2016/17 tax year and therefore have the comfort of knowledge that we could expedite some of these if we exceeded fundraising expectations this tax year.
As we reach the ‘crazy season’ for the tax-efficient investment sector, advisers should check with their proposed investment managers as to where their funds will be deployed. Understanding how investment managers source their investee companies and knowing their investment criteria will help advisers and investors avoid a scenario where funds are invested in any old business just because it qualifies for EIS or SEIS.
January to March is peak season for the EIS and SEIS market and advisers should carefully consider the managers they use in order to ensure any investments are appropriate for their client – not just that the potential tax reliefs are appropriate.
Ian Warwick is managing director at Deepbridge Advisers.