Mobeus VCTs

The Mobeus VCTs – Mobeus Income & Growth VCT (MIG) and The Income & Growth VCT (I&G) – are generalist trusts managed by Gresham House, a specialist asset manager with £8.5 billion under management (December 2023). 

In 2024, the four Mobeus VCTs merged into two (details below), and now have a combined portfolio of around 50 companies and net assets of £338.5 million. Both follow the same investment strategy, selecting companies across a range of sectors and three stages of maturity. 

The Mobeus VCTs have an impressive track record. They are among the top-performing active VCTs over five and 10 years, with an average NAV total return (including dividends) of 71.2% and 141.6% respectively (June 2024). Past performance is not a guide to the future.

• Seeking to raise up to £70 million with a £20 million overallotment facility 
• Target dividend of 7% of NAV – variable and not guaranteed
• Available for the 2024/25 tax year 
• Minimum investment: £6,000 (£3,000 per VCT) – you can apply online
• Deadline: 24 September 2024 (noon) for first allotment 
  

The manager

The VCTs are managed by Gresham House (“Gresham”), a specialist alternative asset manager with a focus on UK equities, private equity and real assets with £8.5 billion under management. 

Gresham, which also manages the Baronsmead VCTs, acquired the VCT business of Mobeus Equity Partners in 2021. 

As part of the deal the entire Mobeus VCT team, including partners Trevor Hope and Clive Austin, moved to Gresham and joined its executive leadership team for the Mobeus and Baronsmead VCTs, as Chief Investment Officer and Managing Director respectively. 

The VCT leadership team is supported by more than 50 people, including 30 investment professionals. Together, they manage £769 million across the Mobeus and Baronsmead VCTs (March 2024).

In 2023, Searchlight Capital, a US private equity firm, acquired Gresham. As part of the acquisition, senior members of the VCT leadership team secured an equity stake in the business, ensuring continuity and alignment in the management of the VCTs.

Investment strategy

In July 2024, the four Mobeus VCTs were merged into two, to deliver cost savings and simplify the existing structure. As a result, the assets of Mobeus Income & Growth 2 VCT (MIG2) and Mobeus Income & Growth 4 VCT (MIG4) were transferred to Mobeus Income & Growth VCT (MIG) and The Income & Growth VCT (I&G) respectively. 

The two VCTs pursue the same investment strategy and invest in the same companies, although in different proportions.

Mobeus historically invested in management buyouts of established small and medium sized businesses. Virgin Wines is one example. 

Since 2015, investments have focused on younger companies across three stages of maturity:

• Early-stage businesses with revenues of around £500,000, expected to represent around 20% of new investments. These businesses will operate technology-led and disruptive business models. 
• Mid-stage businesses generating £1+ million in revenues (expected to represent 60% of new investments). These businesses are likely to have proven unit economics and are seeking additional capital to grow sales and marketing, expand internationally, or continue product development.
• Late-stage, profitable businesses, expected to represent 20% of new investments. 

Successful mid and late-stage investments may include follow-on funding rounds for promising businesses identified at an earlier stage. 

The Mobeus VCTs have found success backing businesses that spin out from existing portfolio companies. These are businesses and teams the manager knows well, so it can invest at an early stage and progressively increase its stake. An example is Preservica, now the VCTs’ largest holding, detailed below.

Portfolio overview

The two VCTs have combined net assets of £338.5 million, with £236.6 million invested in around 50 companies (March 2024). The portfolio is highly concentrated, with the top five holdings accounting for 38.7% of net assets.

Over the last year, the VCTs invested £17 million into seven new companies and £5.6 million into five follow-on investments (March 2024). 

The VCTs offer exposure to a diverse range of sectors, although technology-enabled investments are preferred – software and computer services represent the largest sector at c.50%. 

Following recent exits, 91.8% (MIG) and 87.1% (I&G) are invested in post-2015 growth capital investments, with the rest in legacy and non-qualifying investments as well as a small proportion in AIM-quoted companies (2%, I&G only), cash and other liquid assets (March 2024).

Combined portfolio sector breakdown (%)

Examples of portfolio companies

Preservica – largest holding 

Preservica was spun out of a previous Mobeus investment, Tessella, in 2015. The company had developed a digital preservation system in partnership with the National Archives to store crucial digital data and documents. 

Effective storage for digital data is increasingly important as both the quantity of digital data produced increases and the speed of innovation renders old formats obsolete. That presents a challenge when data might need to be stored and accessed years later to protect intellectual property, meet regulatory requirements or preserve documents of cultural or academic significance.

Preservica continues to grow strongly and now works with thousands of organisations globally, including the European Commission, HSBC and the National Archives. More recently, it collaborated with Microsoft to launch its latest product, Preserve365, which can integrate with the Microsoft 365 suite. 

Mobeus first invested £3 million in 2015 and has since steadily supported the company’s growth, investing a total of £15 million. The holding is now valued at £66.0 million and represents 19.5% of combined net assets (March 2024). Past performance is not a guide to the future.

OnSecurity – recent investment

OnSecurity was founded by a team of ex-professional hackers to provide fast, flexible, and cost-effective protection against modern cybercrime. 

The company’s key service is pentesting: businesses can schedule on-demand simulated cyberattacks performed by OnSecurity’s team of “ethical hackers” to uncover system vulnerabilities. The platform offers a faster average turnaround time than industry standards and is over £1,000 cheaper per project than alternatives. If issues are detected, companies are notified in minutes so they can start remedial work. 

OnSecurity pairs this service with its two products, Scan and Radar. Both work proactively to identify weak points such as password reuse or credential breaches before they can be exploited. Since launch in 2018, OnSecurity has become a trusted security provider, building a customer base of almost 300 clients, including the likes of Lidl and giffgaff.

The Mobeus VCTs invested a total of £3.1 million in June 2024. The funding is expected to be used to support new customer acquisition and develop the technology.

Exit track record

In the three years to March 2024, the Mobeus VCTs achieved nine full and two partial exits, generating total proceeds of £137.5 million and a total gain of £88 million. Legacy investments accounted for 91.6% of exit proceeds. Note, past performance is not a guide to the future and there have also been failures.

Master Removers Group – recent exit

Master Removers Group (“MRG”) was a portfolio of brands specialising in logistics, storage, and removals.

It focused on acquiring local companies with strong reputation that could scale by making use of its regional warehouse and vehicle resources. It also operated a B2B division under its Bishopsgate brand, providing services from IT relocation to secure storage and protection. 

Mobeus first invested in 2014 as part of an equity release deal for existing shareholders. Since then, MRG has seen considerable growth, trebling its storage and removals capacity to cover the entirety of the M4 corridor.

In February 2024, the business announced the sale of its Bishopsgate division to Elanders Group, a global logistics company. At the same time, the VCTs sold their stake in MRG’s domestic removals business to management. The sale generated total proceeds of £23.5 million, equivalent to a 3.3x return. There is also potential for further contingent proceeds – not guaranteed. Past performance is not a guide to the future.

Muller EV – previous failure

As is inevitable with early-stage investing, not all investments work out. Muller EV is an example. 

Muller EV supplied and installed premium electric vehicle charging points to households across the UK. The business had secured partnerships with high-end manufacturers, Porsche and Jaguar Land Rover, however, supply chain issues, a rise in inflation, and the removal of government support for EV charges led to the business entering administration in October 2022.

The Mobeus VCTs invested a total of £1.75 million and recovered £110,000 after realising the holding in early 2024. 

Performance and dividends

The VCTs are among the top-performing active VCTs over five years to June 2024, with an average NAV total return of 71.2%, including dividends. 

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.

Recent performance has been driven by strong performance from Preservica, the VCTs’ largest holding, as well as profitable exits from the VCTs’ legacy investments. 

Post-merger, the VCTs updated their dividend policy from a fixed pence amount to 7% of NAV. This is one of the highest targets in the market. Over five years to June 2024, the VCTs have on average paid cumulative dividends equivalent to 67.5% of the starting NAV. Dividends are variable and not guaranteed. Past performance is not a guide to the future.

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

Dividend payments in the calendar year

Dividend Investment Scheme

Following the merger, both VCTs will operate a dividend investment scheme that allows shareholders to reinvest future cash dividend payments in new shares if desired. As 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 buyback policy

The board of each VCT intends to buy back shares to maintain 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 average discount to NAV as at 30 June 2024 was -6.9%. Over the previous five years the average discount to NAV was -8.3%. 

The discount history is based on the closing share price of the VCTs 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.

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.

Annual rebate when you invest through Wealth Club

The offer includes an annual rebate for Wealth Club investors, payable for the first three years. This is a rebate of our renewal commission and should be equivalent to a percentage (shown in the table above) of your subscription when you invest. Terms and conditions apply.

Deadlines 

• Deadline for first allotment in 2024/25 tax year: 24 September 2024 (noon)
  
• Deadline for second allotment in 2024/25 tax year: 31 October 2024 (noon)
• Deadline for third allotment in 2024/25 tax year: 29 January 2025 (noon)
• Deadline for final allotment in 2024/25 tax year: 26 March 2025 (5pm)

Our view

The Mobeus VCTs have an enviable long-term track record which has been maintained following the shift in strategy from management buyouts to early-stage growth capital investments.  

Profitable exits, primarily from legacy investments, as well as sizeable uplifts in value from Preservica (detailed above) and MPB, the used camera equipment marketplace, have helped the VCTs deliver strong performance in the previous five years to June 2024. With the portfolio’s mature management buyout investments now representing a very small proportion of the portfolio, the VCTs’ growth capital investments will be key to driving performance and meeting their ambitious annual dividend targets.  

The trusts are overseen by a large and experienced investment team, able to support the existing portfolio and find new opportunities. Despite two acquisitions in the last few years, it is pleasing to note the investment team has remained in place and its senior members have bought into the equity of the business, ensuring continuity in the core personnel and investment approach.

In our view, these factors, together with the cost savings and operational efficiencies from the recent mergers, makes the Mobeus VCTs an offer worth considering.

Wealth Club aims to make it easier for experienced investors to find information on – and apply for – investments. You should base your investment decision on the offer documents and ensure you have read and fully understand them before investing. The information on this webpage is a marketing communication. It is not advice or a personal or research recommendation to buy any of the investments mentioned, nor does it include any opinion as to the present or future value or price of these investments. It does not satisfy legal requirements promoting investment research independence and is thus not subject to prohibitions on dealing ahead of its dissemination.