In the next instalment in our series of exclusive interviews with industry experts, Simon Moon, Fund Manager at Unicorn Asset Management, 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?
Our tax advantaged offering is built on over 20-years of AIM investment expertise and is made up of the Unicorn AIM VCT and a suite of AIM IHT & ISA portfolios. The IHT portfolios are designed to deliver bespoke solutions catering to the diverse needs of clients – taking into account differing capital gains tax (CGT), income and growth objectives as well as sustainability criteria.
2.) How active are you in providing education to advisers on the types of clients that are suitable for these types of investments, as well as any changes in regulation or nuances in the existing rules?’
We work closely with our distribution team, Light Tower Partners, who are experts in the tax-advantaged space to provide comprehensive support to advisers. Through a range of different mediums, we always look to deliver valuable insights to advisers, be that in the form of case studies or training sessions to enhance their proficiency and allow them to leverage VCTs and Business Relief (BR) IHT services effectively.
Due to our AIM expertise, we also provide training to facilitate an understanding of the unique benefits and challenges of investing in AIM-listed companies and the shifting rules and regulatory environment. Ultimately, we want to empower advisers to make informed decisions and select the right solutions for their clients.
3.) Where and in which types of companies are you seeing the biggest growth opportunities?
Running a VCT and Smaller Companies portfolios means we often encounter companies with substantial growth potential. These businesses may offer innovative products or services that add significant value to their clients, but they can also carry inherent risks. As an investment team, our focus is to avoid being swayed by the potential upside, and instead prioritise thorough assessment of the management teams in charge and the company fundamentals. In the VCT, our exposure to sectors like healthcare and biomedical sciences – areas where the UK excels – frequently offer promising opportunities. However, it’s crucial to acknowledge the feast or famine nature of these ventures; while successful outcomes can be incredibly rewarding, they often require years of diligent effort and discipline from those running them.
4.) What do you see as the biggest risks for investors?
The biggest risk for investors lies in the misalignment of expectations. While our tax advantaged offerings focussed on the AIM market present access to many promising businesses, they operate within an inherently volatile environment – especially during periods of broader economic stress.
During the financial crisis, the AIM market fell almost 70% in value which is going to be a chastening experience for even the most well informed and hardy investor. Investors in AIM VCTs & AIM IHT services must understand that their investment journey may not be a smooth one. We’ve had the privilege of consistently delivering for our clients over the long term and understand the risks associated with investing in early-stage smaller businesses. The tax reliefs available are there to stimulate investment into higher risk, early-stage businesses and investors should expect an investment journey that reflects that.
5.) Should advisers be worried about a lack of diversification, and why?
We don’t think advisers should be worried about a lack of diversification from underlying strategies as many of the best managers of tax advantaged investments are specialists focussing on specific areas of the market.
Constructing a portfolio of VCTs from a range of providers can give exposure to a diverse spectrum of public and private businesses managed by sector-specific specialists. The idea of constructing a portfolio which is so embedded in planning when it comes to pensions or GIAs is often forgotten when it comes to tax advantaged offerings, but it is important that advisers engage with product managers to understand what each portfolio is giving them exposure to. Similarly, in services aiming to mitigate IHT via Business Relief, numerous solutions offer exposure to a diverse range of drivers across both the UK and international markets.
