Hargreave Hale AIM VCT

Hargreave Hale AIM VCT is an established VCT that launched in 2004. It is managed by Canaccord Genuity Fund Management, which acquired experienced UK smaller company fund manager Hargreave Hale in 2017. 

The VCT has net assets of £152.3 million (August 2024), of which around 55% is invested in 63 VCT-qualifying companies. These are mostly quoted on AIM (56), although the manager will also invest in unquoted companies on an opportunistic basis. The remainder is spread across the Marlborough Special Situations and UK Micro-Cap Funds, fixed income securities, UK main market equities, and cash. 

Over five years (to June 2024) the VCT has paid 26.55p dividends per share, equivalent to 37.0% of starting net asset value of the VCT. However, AIM has had a very tough couple of years, declining -35.8% in the last three years, compared to -41.9% for the VCT. Over the 10 years to 30 June 2024, the VCT delivered a NAV total return (including dividends) of 3.9%. Past performance is not a guide to the future.

• Seeking to raise up to £20 million
• Targets annual dividends of 5% of NAV – variable not guaranteed 
• Available for the 2024/25 and 2025/26 tax years 
• Minimum investment £5,000 – you can apply online
• Next deadline: 8 November 2024 (5pm) for first allotment; 29 November 2024 (5pm) for 1% early bird saving, subject to £10 million capacity 

The manager

Canaccord Genuity Asset Management, formerly Hargreave Hale, specialises in UK smaller company investments. The team, comprising 16 investment professionals, manages £2.7 billion (August 2024) across the VCT and many of the highly regarded Marlborough unit trusts, including the £655 million Special Situations Fund (September 2024). 

The firm is part of Canaccord Genuity Wealth Management, a global investment group with C$105.8 billion under management or administration (June 2024).

The VCT team is headed up by Oliver Bedford, lead manager since July 2019. Having joined as an analyst in 2004, Oliver has worked alongside previous lead manager Giles Hargreave until December 2020, when Giles stepped down. Oliver is supported by co-manager Lucy Bloomfield, portfolio manager Anna Salim, investment analyst Archie Stirling, and a legal counsel.

Investment strategy

The VCT expects to invest primarily in AIM-quoted companies, and to a lesser degree in private companies. 

The VCT also invests a sizeable portion of assets in non-qualifying UK and international equities, fixed income securities and cash. The team will target non-qualifying investments on an opportunistic basis. 

With any investment, the team looks for the same core qualities:

• A strong and experienced management team
• Intellectual property
• High cash generation, strong balance sheets, and revenue visibility
• Competitive market positions with defined customer profiles

The investment team follows a stock-specific, rather than sector-specific, investment approach and is more likely to provide growth and development capital to relatively established businesses than start-ups. 

A proportion of funds raised will be invested into the Marlborough Special Situations Fund and Marlborough Micro-Cap Growth Fund to maintain exposure to small companies pending investment into qualifying companies.

Portfolio overview

Qualifying investment activity remained relatively subdued in the six months to March 2024. The VCT invested £2.5 million into one new investment (Qureight – see below) and £1.4 million into three follow-on opportunities. 

The VCT has net assets of £152.3 million (August 2024). The top 10 qualifying investments currently represent 23% of the VCT’s net asset value. 

The VCT has a very diversified portfolio. Around 55% of net assets is invested in qualifying investments, predominantly quoted on AIM but with some unquoted investments. Non-qualifying account for a greater proportion of non-qualifying investments than many peers: 21.9% is across non-qualifying equity investments and two Marlborough Funds and 13.9% in blue-chip fixed income investments. There is also a 0.4% allocation to a gold mining ETF.

The remaining 8.3% of net assets is in cash. 

Asset allocation (%)

Sector breakdown (%)

Examples of portfolio companies

Beeks Financial – largest quoted holding 

For financial institutions that rely on rapid transmission, a millisecond delay can drastically change outcomes so dependable and quick connections to the market are essential. 

Beeks Financial (“Beeks”) specialises in building data infrastructure for high-speed financial transactions. Using its own data centre network, it can offer near instant connection to over 200 exchanges around the world. 

In the six months to December 2023, the Group reported a 25% increase in revenues to £13 million, compared to the same period the year prior. This was driven by organic growth in its cloud service offering as well as two significant new contract wins. Furthermore, its subscription-based model lends itself to high levels of recurring revenue, which currently accounts for 87% of total revenue. 

Hargreave Hale invested just over £1 million in November 2017 as part of the group’s IPO. The holding is currently valued at £4.8 million and represents 3.2% of net assets. Past performance is not a guide to the future.

My 1st Years – largest unquoted holding

My 1st Years was founded in 2010 by schoolmates Daniel Price and Jonny Sitton after struggling to find a unique and personal gift for a friend’s newborn.

They launched My 1st Years to sell high-quality personalised gifts for babies and young children online, offering everything from embroidered dressing gowns to toys. 

The company raised £5.6 million from Hargreave Hale AIM VCT and Beringea, manager of the Proven VCTs, in January 2017. However, having successfully weathered the pandemic, the firm was hit by disaster in 2021 when its warehouse caught fire – destroying £3 million of stock, £1 million of equipment and halting sales for 18 weeks. The firm bounced back strongly, with sales of £18.8 million in 2022, the most recent year for which figures are available, up 40% year-on-year. 

The Hargreave Hale AIM VCT’s stake is now valued at £3.1 million, on a £2.5 million cost, and accounts for 2% of net assets (August 2024). Past performance is not a guide to the future.

Qureight – recent investment, unquoted

Qureight is a “tech company run by doctors”, aiming to help clinicians and pharmaceutical companies better understand complex diseases. 

The idea stemmed from founder Dr Munhunthan Thillai’s clinical experience. Whilst consulting on an advanced lung disease, he discovered the drug treatment was causing the patient’s condition to deteriorate – a fact previously obscured by the complexity of the condition.

Qureight’s platform should help address this. Through its data contract with NHS England, the company can access and analyse huge quantities of high-value data. It then combines clinical and imaging data to track disease progression and measure drug response.

Its analysis can help improve existing treatments or be used to create virtual trial patients, helping pharmaceutical companies design more efficient clinical trials for drug development. 

The VCT invested £2.5 million in March 2024 as part of a $8.5 million Series A round alongside XTX Ventures, Guinness Ventures, and existing investors. 

Bidstack – example of previous failure

As is to be expected, not all investments work out. Bidstack is an example. 

Bidstack was an advertising company which helped video game publishers and developers monetise their games through native in-game adverts and branding deals. 

However, following a protracted period of underperformance, the company entered administration in March 2024 after its fundraising efforts failed. The shares were cancelled from trading on AIM and the VCT’s holding was fully written down, resulting in a loss of £2.7 million.

Exit track record

Most of the companies in which AIM VCTs invest are quoted on AIM, so shares can be bought and sold more easily than is the case with private (unquoted) companies. Realisations – particularly partial ones – are common with AIM VCTs, for instance, to rebalance the portfolio. We do not believe they are indicative of a manager’s performance and for this reason we don’t focus on them.

Performance and dividends

The AIM market fell 35.8% in the three years to June 2024 – past performance is not a guide to future performance. 

The Hargreave Hale AIM VCT was also affected, falling 41.9% over the same period (NAV total return including dividends). Over five years the VCT has produced a NAV total return (including dividends) of -7.5%. This includes 26.55p per share paid out to investors in dividends, equivalent to 37.0% of starting net asset value of the VCT.

Over ten years, the VCT has delivered a NAV total return of 3.9%. 

Past performance is not a guide to the future, dividends are variable and not guaranteed. Note, we show VCT returns over a five-year period as a minimum, where possible. Where a VCT has followed the same investment strategy for longer, we also show returns over 10 years.

NAV and cumulative dividends per share over five years (p)

Dividends paid per calendar year

Dividend Reinvestment Scheme (DRIS)

There is a Dividend Reinvestment Scheme that allows shareholders to reinvest future cash dividend payments in new shares, if desired. As these are new shares they should be eligible for tax relief (you will need to claim this on your tax return or directly with HMRC) and the shares will count towards the VCT annual subscription limit.

Share buybacks

The board intends to buy back shares at up to a 5% discount to the prevailing net asset value. This is not guaranteed – please see the offer documents for details.

Discount history

VCT shares are traded on the London Stock Exchange. Similar to investment trusts, the share price can fluctuate and can be different from the VCT’s net asset value (NAV), i.e. the value of the VCT’s underlying investments. The difference between the share price of a VCT, and its net asset value per share, is called a discount.

Based on data from Morningstar, the discount to NAV as at 30 June 2024 was -10.6%. Over the previous five years the average discount to NAV was -6.1%.

The discount history is based on the closing share price of the VCT at the end of each month, divided by the latest net asset value at the time. Past performance is not a guide to the future. Investors looking to sell their VCT shares may get a better price using the VCTs’ share buyback facilities, although this is not guaranteed.

Risks – important

This, like all investments available through Wealth Club, is only for experienced investors happy to make their own investment decisions without advice. 

VCTs are high-risk so should only form part of a balanced portfolio and you should not invest money you cannot afford to lose. They also tend to be illiquid and hard to sell and value. Before you invest, please carefully read the Risks and Commitments and the offer documents to ensure you fully understand the risks. 

To retain the tax benefits, VCTs should be held for at least five years. If you sell VCT shares and reinvest in new shares of the same VCT (including any mergers) within six months, tax relief can be restricted. Tax rules can change and benefits depend on circumstances.

The quantity and quality of investment opportunities available to AIM VCTs is dependent on sufficient VCT-qualifying fundraising activity on the AIM market, which will fluctuate. 

AIM shares can be very volatile and could suffer extreme volatility if the market falls sharply. The difference between the buying and selling price of AIM-quoted companies is often wider than those listed on the main market. 

Charges and savings

A summary of the main charges and savings is shown below. The net initial charge shown includes the Wealth Club saving and any early bird discount. The investment may have additional charges and expenses: please see the provider documents including the Key Information Document for more details, offer price and share allotment calculation methodology.

Please note, capacity – for the offer or any early bird savings – can be reached early, and we may not be notified of this by the VCT in real time.