VCT charges on Cash holdings is negaitive interest rates!
Posted: April 12th, 2020, 4:01 am
Am I the only one who gets so upset with managers of VCTs imposing an advisor charges on cash held doing nothing. This weeks annual report from British Smaller Companies VCT 2 highlights this, and the other risk free returns that YFM earns on our money.
They have a charge of 1% on cash in excess of £10 million, but when you do the math, the charge on the amounts up to 10 million is 2% as it constitutes part of “other assets” So with 3 years to invest monies we give them they have up to 6% for the joy of holding our money in addition to the charge they make for getting us to part with it.
When you add that to the 3% they can charge the investee for the use of our money ( only 2% for follow ons) approx £45 for each of the 6 investments averaging £1.5 million this year and up to £ 40k per annum for monitoring each investee then it brings to just 10% the income the manager makes before our money is invested after 3 years “maturation” in their pockets.
Yes, interest is earned at bank but not enough to cover the charge made by the manager.
While this is roughly in line with the market, is it not time that the charge for holding our cash is dropped to zero and that reports include what the managers earn from companies related to VCT investments is made explicitly clear, rather than the current, cosy arrangements, or that VCTs be made tender for management companies every 4-5 years.
They have a charge of 1% on cash in excess of £10 million, but when you do the math, the charge on the amounts up to 10 million is 2% as it constitutes part of “other assets” So with 3 years to invest monies we give them they have up to 6% for the joy of holding our money in addition to the charge they make for getting us to part with it.
When you add that to the 3% they can charge the investee for the use of our money ( only 2% for follow ons) approx £45 for each of the 6 investments averaging £1.5 million this year and up to £ 40k per annum for monitoring each investee then it brings to just 10% the income the manager makes before our money is invested after 3 years “maturation” in their pockets.
Yes, interest is earned at bank but not enough to cover the charge made by the manager.
While this is roughly in line with the market, is it not time that the charge for holding our cash is dropped to zero and that reports include what the managers earn from companies related to VCT investments is made explicitly clear, rather than the current, cosy arrangements, or that VCTs be made tender for management companies every 4-5 years.