Thumbs up for the UK's digital sector as Albion raises £38m for VCT funds

Digital investment specialist Albion has set out to raise £38m to top up its six venture capital trusts (VCTs), predicting a strong deal pipeline and increased appetite from investors seeking yield.

Despite uncertainty in the UK, Albion believes its sector is thriving. It recently invested in Locum's Nest, an app which helps NHS trusts recruit doctors with time to spare, and alternative broadband provider G.Network which delivers high speed internet to smaller London businesses.

Rather than seeing these young businesses recede into their shell in the face of Brexit, Albion has found them keen for funding to push forward.

“We are mindful of Brexit, and the biggest issue is uncertainty, but we're not seeing that uncertainty dampening people's desire to grow their business,” said the firm's deputy managing partner Will Fraser-Allen.

“Over the last few years we've noticed a pretty dramatic increase in opportunities coming our way. There is a real entrepreneurial culture in the UK now.”

Technology-enabled companies were driving these opportunities, Fraser-Allen noted, especially those in digital healthcare, automation, digital security and data analytics niches.

Happily, there appears to be a corresponding interest from retail investors in VCTs to fund this glut of deals.

The Albion VCTs' monthly dividend with a yield approximately 5.6 per cent – or eight per cent after tax relief – is clearly one factor driving this in the current low interest rate environment.

This has collided with changes to how much can be saved in pension schemes, as Fraser-Allen noted Albion has also “seen demand from those looking to save up pots for retirement”. Added to that, he believes there has been a recent shift in spirit towards supporting smaller UK businesses.

The top up for Albion's six funds, which are together valued at around £340m, will allow Albion to add to the funds rather than launching new ones.

This reduces the lump of cash waiting to be invested, increasing the efficiency of returns, and investors will be able to look at the existing portfolio and its performance before committing any money. They will be be able to buy into an existing income stream with established dividends.

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