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buying VCT shares in market

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IJ49
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buying VCT shares in market

#220224

Postby IJ49 » May 8th, 2019, 5:36 pm

I recently bought some Albion VCT shares through Alliance Trust on-line dealing, but when I tried to buy some more I couldn't. On querying this I was told that as there was only one market maker for the Albion VCTs Alliance could not ensure the best dealing price and if the VCTs went bust (??) then I would have problems selling. I pointed out that the latter point was unlikely and that the former did not allow me to deal as I wanted.

Has anyone else had this problem in buying VCT shares through an on-line broker, particularly Albion's?

With the takeover by Interactive Investor in progress, do they have the same issue?

Many thanks,

IJ

UncleEbenezer
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Re: buying VCT shares in market

#220249

Postby UncleEbenezer » May 8th, 2019, 8:06 pm

Sounds a bit bizarre. Are you sure you're reporting accurately? Of course it's possible the person you spoke to was out of his/her depth dealing in VCT shares.

The underlying point is that VCT liquidity is indeed low: they can be challenging to buy and sell. Though for a healthy/mainstream VCT like Albion I wouldn't expect serious problems, beyond a bit of a spread. What may have happened is that the number of shares you were looking to buy were hard to source at all at the time.

scotia
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Re: buying VCT shares in market

#220279

Postby scotia » May 8th, 2019, 10:56 pm

I had a look at Albion VCT trades over the past month - there were 15 of them, almost all marked as sales. So I would have thought that there was sufficient liquidity for a modest purchase
Its many years since I purchased VCT shares on the market - but looking back I see that in 2013 I purchased shares in Mobeus 2, Albion Technology and General, Maven Talisman, Northern 2, Downing Planned exit VCT 6 and VCT9. All online through Fastrade/Charles Stanley Direct. These were all modest purchases around the £1500 mark.
My experience in the past few years has all been in the selling of VCTs. I used Charles Stanley Direct (CS), and had no problems selling online Octopus, Hargreave Hale, Amati, and Elderstreet shares. However last year I made repeated attempts to sell Maven 5 - placing orders at the bottom of the spread without any success. I was phoned by CS who told me of the difficulties of selling, and the need to know when buy-backs were taking place - although this advice did not appear to match with the sales that I could see taking place at the bottom of the spread. However I took their advice, and paid for a telephone order - which was fulfilled almost immediately! All my more recent sales have been made through Hargreaves Lansdown who sell at the best price they can obtain - in all my sales at the bottom of the bid/offer spread.

barchid
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Re: buying VCT shares in market

#220304

Postby barchid » May 9th, 2019, 7:13 am

IJ
I do know some online platforms exclude VCT's from the stocks/funds you can deal in, I was very happy using i-web on vct's until a few years ago they simply announced that they would no longer be available & any held in my account would have to be transferred out , Halifax (owner of i-web) did the same.
I transferred my vct's to Sharedeal active & have been happy with them.
One rather obvious thing to do would be to see if there is a bid for a much smaller amount than you wish to sell as if your order is larger than the market makers size you will be told, "online quote not available" or similar.

Kidman
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Re: buying VCT shares in market

#220348

Postby Kidman » May 9th, 2019, 10:11 am

I haven't bought VCTs in the secondary market for many years and all my recent sales have been using HL's 'Bed and ISA'.

However on the LSE price pages one can see the "Exchange market size" for every stock and for AAVC it is 500. I believe this is the minimum number of shares that the market maker(s) must quote a price for (and trade if requested so to do) but they do not have to quote for anything higher. Hence dealing above this fairly low amount may encounter different problems!

BusyBumbleBee
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Re: buying VCT shares in market

#220412

Postby BusyBumbleBee » May 9th, 2019, 12:56 pm

I am not at all sure that there isn't a 'false market' in VCT shares - certainly it is most peculiar. In nearly all cases there is a buyer of last resort - the VCT itself which effectively sets a price for the share by announcing the price it will buy in at, often expressed as xx% of NAV. Over the years this has narrowed from 15% (ish) thru 10% (ish) to a near standard 5% ish. This has taken the fun and the skill out of buying second hand VCT shares. With most shares there is no such support mechanism and a skilled (or lucky) investor has a chance to buy out of favour or undervalued shares at what he considers a bargain price.

Over the years I have bought seriously distressed (price wise) VCT shares at a HUGE discount to NAV - BSC, the VEN twins, CORE and Chrysalis being prime examples and later sold them for considerable gain often with major special dividends along the way to put yet more jam on the bread.

Very difficult to do that these days (although I live in hope that the wall of VCT money chasing a diminished pool of riskier assets by managers developing new skills will give me a chance in a few years time!).

The OP mentioned AAVC.

It is worth pointing out that in their half year report of March this year they said this: (any bold is mine)
Share buy-backs

During the period from 1 October 2018 to 31 December 2018, the Company
purchased 405,000 shares for GBP294,000 at an average price of 72.2
pence per share. All of the shares are to be held in treasury.

It remains the Board's policy to buy back shares in the market, subject
to the overall constraint that such purchases are in the Company's
interest, including the maintenance of sufficient resources for
investment in existing and new portfolio companies and the continued
payment of dividends to shareholders.

It is the Board's intention for such buy-backs to be at around a 5 per
cent. discount to net asset value, so far as market conditions and
liquidity permit.

During that period only 344,191 shares were reported on ADVFN as traded thu the market by the way and those I have looked at were all marked as SELLS and mostly(?) at a price of 71.8.

One would have thought the Market Makers would leap at the chance to sell shares to a PI at more than the 72.2 paid by the VCT. So why did the OP have this problem? And why when there is quite a volume passing thru the market is the spread so wide.

Take a look at AMATI VCT buying in the market and the narrow spread. They seem to have a system which serves the investor better than most - but then their underlying investments - AIM shares - have a known value at every minute of every day and their published NAVs are a lagging indicator. So there is a chance here for the PI to make a turn (but sadly - for me - not a big enough turn to make the trading risk worthwhile)

barchid
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Re: buying VCT shares in market

#220437

Postby barchid » May 9th, 2019, 2:11 pm

BBB
I quite agree with you that there is something of a false market in VCT shares. I have never physically audited this, but my feeling is that the best time to sell a vct is when that company has an offer open, the market prices always seem to be on a lower discount then, and there is greater liquidity !

UncleEbenezer
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Re: buying VCT shares in market

#220449

Postby UncleEbenezer » May 9th, 2019, 2:53 pm

Of course it becomes a false market as soon as the VCT itself announces a support price!

Doubly so since that six-month rule killed off most of the would-be secondary market by making purchases risk losing opportunities to claim tax relief. My spreadsheet shows I haven't bought in the secondary market since the 2013-4 season. Mind you, I haven't bought new since 2015-6, either.


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