A slow start to 2023 may have led investors to question how many good UK companies are available to invest in, but there are increasing numbers of potential investments, senior VCT managers have said.
Simon King, manager of the Octopus Future Generations VCT, and Kate Tidbury, senior fund manager, said although there seemed to be a disconnect with headlines showing huge fundraising among British VCTs and what is available to invest in, both the unquoted and small quoted markets are showing promising signs.
As of July 2023, the number of companies trading on the London Stock Exchange stood at 1,900.
According to analysis from Statista, this marked a slight decrease from the previous month, and is still one of the lowest number of companies listed over the past decade.
Quoted markets have also been volatile through the year, particularly at the smaller end, which means some planned flotations have not happened and some companies have even delisted.
In general, fundraising was slower in the first half of the year.
"Public markets have been volatile, particularly at the smaller end and this has meant that planned floats have not materialised and fundraising in general was slower in the first half of 2023", she said.
However, Tidbury said she believes there as been a strong pick-up in recent months.
She told FTAdviser: "We have seen a pickup in VCT qualifying opportunities over the summer, particularly for existing AIM companies needing further funding rounds and this is continuing.
"As with the private sector, valuations are lower, but we are still seeing companies with ambitions to float later this year."
Octopus's AIM VCTs have opened with a raise of £20mn, with the option to extend to £30mn, subject to deal flow visibility in line with a measured annual approach to fundraising.
Subdued market
She said while IPOs have been subdued in the main market and on Aim over the past year to 18 months, there have been some "strong VCT-qualifying opportunities" among the ones that have come to market.
Tidbury added: "The reason behind this slowdown is a prolonged period of uncertainty caused by a steep rise in inflation and interest rates, which has in turn, caused market volatility.
"We hope that signals that inflation is now coming down and interest rates are peaking, will restore confidence in what is now looking like a very undervalued stock market if we compare it internationally.
"A more stable period should encourage the companies which have been weighing up a stock market float to come - we saw this happen immediately post-covid."
In terms of opportunities, Tidbury said the team was seeing existing companies needing further funds, which may have floated two or so years ago.
She added: "In some cases, we might have turned them down on the basis that they would need further funding or alternatively invested a portion knowing a further funding would be a likely outcome.”
