In the next instalment in our series of exclusive interviews with industry experts, Andrew Wolfson, CEO and Founder of Pembroke VCT, provides his insight on the biggest growth opportunities and most common risks for investors, and discusses his company’s approach to investing.
1.) What tax-efficient schemes does your company work with, and how do you offer a unique/compelling approach for advisers?
Pembroke is a Venture Capital Trust (VCT), which means investors can benefit from both income tax relief and tax-free dividends when they invest into the existing portfolio of over 45 companies. Investors can claim 30% in income tax relief on the first £200,000 they invest in VCTs in each tax year. On top of the tax relief, investors are able to achieve tax-free returns and we have increased our target dividend from 3p to 5p.
We find that our straightforward and transparent approach resonates well with advisers and with the founders of our portfolio companies. We invest in exceptional founders with disruptive business models and focus on sectors that we have experience in, aiming to deliver returns to our shareholders whilst providing support to the management teams of the companies we are invested in.
2.) Where and in which types of companies are you seeing the biggest growth opportunities?
We focus our investment in three areas where we have seen a strong and consistent flow of robust, growing businesses: consumer, technology and business services. Consumer spending remains resilient, highlighting the importance of supporting companies that provide innovative products customised to consumer needs. The at-home wellness sector greatly illustrates this trend, particularly given its continued growth in the aftermath of the pandemic.
Our largest holding is LYMA, a pioneering brand in the wellness industry and the company behind one of Time Magazine’s Top 200 inventions of the year. The LYMA Laser is an example of a company that has tapped into consumer demand with an innovative new product, and which has subsequently achieved considerable success and received numerous accolades.
Transport technology is another area we have identified with significant growth potential. We recently invested in Transreport – a Passenger Assistance application which allows users requiring travel assistance to pre-book their journeys in advance. This has been an exciting addition to our portfolio, which already includes the train-ticketing app, Seatfrog.
3.) What do you see as the biggest risks for investors?
Investment valuations have been coming under greater scrutiny and we have seen some high-profile examples of businesses with high valuations encountering difficulty due to the pressure of previous valuations having been driven by hype rather than sense. This results in companies having down rounds, which may in turn have a consequential impact on future fundraising.
We are confident of the robust valuation process we have in place, and we maintain transparency by providing access to all our investment valuations in our published financial statements.
4.) Should advisers be worried about a lack of diversification, and why?
VCTs are becoming a mainstream route to adding diversification to an investment portfolio. Pembroke VCT gives investors access to a carefully selected portfolio of over 45 companies in three sectors. Having been established in 2013, we now have companies in our portfolio at very different stages of growth
