Clients considering investing in a portfolio of EIS-qualifying companies, managed by a specialist provider, are often daunted by the abundance of offerings available.
With a plethora of investment approaches, sector specialisms, and track records to consider, it is vital to establish a client’s needs, risk-appetite and any investment preferences.
In this article, Sam McArthur of Praetura Investments takes a closer look at some of the not-so-obvious factors an investor should consider when selecting an EIS manager.
Communication: An investment manager’s activities from initial investment to exit
EIS managers often sell themselves on factors such as deal flow, track record, speed of deployment and others. All are important for the success of an investment, but frequently overlooked factors in the selection of an EIS manager are geographic diversification, the support the manager provides to portfolio companies and the transparency of communication throughout the investor journey.
EIS shares must be held for a minimum of three years and investment time horizons can range from four to 10 years, depending on sector and investee company. This can leave a substantial time frame where interaction between client, adviser and fund manager may be limited and reporting may only occur in line with regulatory requirements.
A dedicated investment manager like Praetura can make a real difference in the transparency of communication and we have endeavoured to support investors and advisers in this regard with our ‘More Than Money’ approach since 2011.
What is More Than Money? It means a commitment to creating an unrivalled experience for investors and advisers throughout the entire life span of an investment and striving to provide industry-leading levels of service. One notable example of this includes Praetura’s regular, transparent and timely communications, as well as our investment into a bespoke online portal where investors are able to find all the information pertaining to their investment holdings. In addition, we release our detailed Investor Updates, a major piece of work, taking the form of a professionally designed report with company snapshots, case studies and KPIs to articulate the status of each investor’s portfolio on a regular basis.
Diversification: Offering meaningful diversification through unique opportunities
Secondly, a core part of the More Than Money ethos is a commitment to championing regional investment and finding opportunities in the North of England. Aiming to be the VC of choice for underserved founders in the North, Praetura is driving awareness to not only the abundance of opportunities in the region but also the shortfall in funding compared to London and the South East. Recent research that Praetura carried out has highlighted a £600m funding shortfall per year. The funding gap has started to make the investment community take notice of the North, where the competition for deals is sometimes lower and the valuations can be more competitive when compared to London.
Since 2011, we have significantly grown our Northern EIS portfolio with investments into Northern-based businesses such as Arctic Shores, Wi-Q, Modern Milkman and Aerocloud. It is no secret that the number of early-stage businesses in the North is growing and these success stories are filtering talent and capital into the regional eco-systems to support the next generation of start-ups.
Portfolio Support: A hands-on approach to growth
Selecting a fund manager that can offers more than just capital can be crucial factor in delivering returns to investors. Deep sector expertise and an experienced investment team who seek to work closely with founders, offering support and advice, can help turn young businesses into breakout stars. Through the Praetura Operational Partner programme, the investee companies receive input from experienced business leaders and help to increase their chances of success. These industry heavyweights have had celebrated careers, holding leadership positions in success stories such as AO.com, Apple, ANS, Dr. Martens and JD Sports.
Fund managers like Praetura can provide geographical diversification to investors via exposure to northern businesses, can increase the chances of investment success via the extensive support provided to investee companies and can ensure that advisers are at the forefront of the investor journey via a transparent approach to communication. The Praetura EIS Growth Fund is now open for investment. Investors will be able to support growth in companies predominantly across the North of England and back exceptional founders.
