Great British Investment Roadshow

Transcription

1 Great British Investment Roadshow The Benefits of EIS November

2 Important Notice Par Fund Management Limited ( PFML ) is authorised and regulated by the Financial Conduct Authority. This document is intended for use only by financial services professionals for continuing professional development and technical awareness purposes and should not be made available to investors. The document contains illustrative data relating to returns from various asset classes and the effects of tax reliefs available under the Enterprise Investment Scheme. This data is illustrative only and actual returns, as well as the actual value of tax reliefs can vary according to a number of factors. All investment activity involves risk and past performance is not a guide to the future. November/December

3 Agenda The Benefits of EIS What? Why? How? Who? Any Questions? Further Information 3

4 What is EIS? The Enterprise Investment Scheme is a measure introduced by the UK government to stimulate (via tax breaks) investment in growth companies, creating high-value jobs and boosting the economy Used as intended, EIS is all about venture capital, a sub-set of private equity. It s a close cousin of the VCT scheme As far as HMRC is concerned, EIS is good tax avoidance! EIS pays for itself, as the cost of tax breaks to investors is outweighed by the tax take from EIS companies and their employees 4

5 What is EIS? EIS offers a powerful bundle of tax reliefs EIS Relief: up to 30p in each invested is rebated to the investor by HMRC against income tax CGT Relief: investment gains are free of CGT Loss Relief: net losses (i.e. up to 70p of each invested) are available to be deducted from taxable income or set against taxable gains for CGT purposes CGT Rollover Relief: chargeable gains may be sheltered for the duration of an EIS investment, so that no CGT is payable on the gain rolled over until the investment is disposed of) IHT: EIS investments (if held for at least 2 years) do not form part of the estate for IHT purposes SEIS reliefs are similar, but not identical 5

6 Why Invest in EIS? Tax-advantaged savings are increasingly hard to come by More IFAs are looking for alternative tax efficient investments in light of the pension savings cap EIS has, in real-world terms, no limit for the vast majority of investors EIS can have a material positive effect on post-tax portfolio returns Investors paying a marginal rate of income tax of 45%, with significant capital gains or wishing to reduce the size of their estate for IHT purposes may find EIS especially useful 6

7 Why Invest in EIS? There are real opportunities for growth Within a portfolio, because venture returns are uncorrelated to mainstream asset classes, an allocation to venture can sweeten the overall portfolio return with only a marginal change in portfolio risk EIS mitigates down-side risk significantly, while gains are free of CGT 7

8 Why Invest in EIS? TVPI Ratio Before and After EIS 2.50x 2.00x 1.50x 1.00x 0.50x Pre-tax Post-tax, no EIS Post-EIS 8

9 Who to Invest With? The cardinal rules Quality management, product/service, investment terms Tax risk EIS rules must be obeyed and pushing the boundaries can risk the loss of reliefs Diversification across sectors, stage and cycle Discipline portfolio limits, investment objectives Exit no EIS investment is worth anything until you achieve an exit! Where will the exit come from, when might it occur? 9

10 Who to Invest With? Do It Yourself or get an expert in? DIY most forms of single company investment Time Expertise Access to opportunities Expert Managed Funds and Portfolio Services Convenience Possible loss of choice Safeguards 10

11 Who to Invest With? In choosing a specialist provider, remember the 4 Rs: Research there are (currently) four providers of independent research on EIS funds and portfolio services Reputation reputation takes a long time to earn, but can be lost in an instant. Good fund managers remember this Record we all know that past performance is no guide to the future, but we also all know that track record is important. Investment returns are most important, but consistent access to investment opportunities is too Responsiveness if you are recommending a fund manager to your client, you want to know that your client will be looked after, or that you can look after them, so look for managers who are investor-focused 11

12 Why Invest in EIS with Par Equity? Excellent deal pipeline Experienced team of entrepreneurial partners with established track record of building, managing and successfully exiting companies Unique investment model leveraging business insiders that is well suited to growth company investment Investor focused business model 12

13 Any Questions? 13

14 Appendix: Par Equity & the Par Syndicate EIS Fund 14

15 Overall Par Equity gives the impression of being a well run company with a credible investment process. The team brings a broad range of backgrounds with experiences in different areas. Those we have met give the impression of being sober assessors of businesses rather than technology evangelists. The age of the company does mean the track record currently lacks depth, but its returns so far show much promise. Hardman & Co. 15

16 Par Equity Par Equity is an owner-managed investment firm founded in 2008 Our core business is venture capital, where we have been active in EIS investments since million invested in 37 companies to date 30 existing portfolio companies (after 4 successful exits and 3 failures) Realised returns from the 7 companies exited of 1.9x / 21% IRR Investing in innovative companies with high growth potential, we have a distinctive investment model that harnesses the intellectual and financial capital of individual investors with deep sector knowledge and combines this with capital provided via the Par Syndicate EIS Fund We also manage residential property funds and are in the process of raising a commercial forestry fund For further information about Par Equity, see or contact Pauline Cassie (pauline.cassie@parequity.com) on

17 Par Syndicate EIS Fund The Par Syndicate EIS Fund is evergreen it s always open for investment and can be accessed by retail investors The Fund started investing at the end of 2012 and has invested in sixteen companies to date, with one exit DPI pre-eis 0.08x, post-eis 0.12x RVPI pre-eis 1.25x, post-eis 1.79x (6 portfolio companies are still held at cost) TVPI pre-eis 1.33x, post-eis 1.90x The Fund s focus is on growth companies, operating within the broader technology sector. We aim to invest once the company has started to make sales, but before it has reached profitability, then work hard with the management team to take the company to break-even and beyond We invest across the UK, but our geographic bias is the northern half of the country The Fund s distinctive feature is that is co-invests alongside, and on the same terms as, experienced individual investors who, collectively, have relevant technical and commercial insights that give significance to their decision to invest. They also provide a welcome reservoir of executive experience to help investee companies as they grow 17

18 Portfolio Powered by Trust Exits 18

19 Partners Paul Atkinson Paul is a serial entrepreneur and serial angel investor with experience in the technology and services sectors. His responsibilities in Par Equity include leading the investor relations and portfolio management teams. He is also responsible for Par Forestry Partners LP. In 1995, Paul founded Direct Resources, an IT recruitment business that was sold to Mastech in 1999 for 3.4 million. At the same time, he spun out Recruitment Scotland, was sold to TMP Worldwide in 2000 for 9.0 million. In 2001, he founded Head Resourcing, which has grown to 45 million in He stepped down from his executive role in 2008 to establish Par Equity Andrew Castell Andrew is a Chartered Accountant with extensive corporate finance and corporate restructuring experience. His responsibilities at Par Equity include finance and regulatory functions. Andrew began his career in audit and management consultancy at Touche Ross (now Deloitte). He then spent several years doing transactional corporate finance advisory work in investment banking. He was Group Finance Director of GoshawK Insurance Holdings, and later CBS Insurance Holdings, where he was heavily engaged in restructuring work to address consequences of significant underwriting losses. While at CBS, Andrew was instrumental in building up Insurance Capital Partners, an innovative and successful fund product providing direct exposure to property & casualty insurance underwriting returns. 19

20 Partners Robert Higginson Robert s background is in the software and technology industry, having held a number of senior strategy positions within blue-chip organisations in Europe and North America. He is responsible for screening new investments and Par Equity s IT and communications infrastructure. Robert began his career in 1980 as a programmer and later worked as a development manager for Artermis International. He moved to financial services as a manager at Reuters in He later joined Telekurs in Switzerland before moving into strategy at ABN Amro and Royal Bank of Scotland. Since 2002, Robert has been an independent consultant working with universities on technology transfer, startup, and early stage businesses, leveraging his international network to provide advice and financial services. Paul Munn Paul is a Chartered Management Accountant with experience in corporate management, turnarounds, business development and active shareowner engagement. He is responsible for managing the business, in addition to property investment and trading vehicles. Paul has worked in a number of industry sectors, principally consumer goods, manufacturing and healthcare. He joined Dawson International, an international textile business in 1996, where he was appointed Group Finance Director and later Chief Executive in In this capacity, he led the business through a restructuring as it regained its historical focus as a cashmere specialist. Paul was a non-executive director of European Home Retail between 2002 and Paul was also responsible for corporate governance and active shareholder engagement services with Hermes Fund Managers from 2005 to

21 Why Invest in EIS? Asset Allocation Yield % Yield Capital % Capital Total Post-tax Return Equities 500, % 17, % 20,000 37,500 17, % Fixed income 200, % 2, ,500 1, % Cash 25, % % Property 125, % 10, ,000 6, % P2P loans 50, % 3, ,000 1, % Growth EIS 100, % % 10,000 10,000 10, % Total 1,000,000 33,125 30,000 63,125 37, % Core portfolio 27, % EIS Relief 5,700 CGT Rollover 2,100 Loss Relief 1,197 36, % EIS return 10,000 Total return 46, % 21