Impatient Capital

Seneca’s Business Development Director, Ian Battersby gives his take on matters as the outcome of the Patient Capital Review are awaited

The results of the Review are eagerly anticipated by tax advantaged product providers, advisers and investors alike but at the present time there is very little clarity about what might emerge. The range of outcomes could be almost anything. But whatever rules are changed, presuming they must be, how are IFAs supposed to embrace them in a way that could deliver the impact sought by the Review?

For starters, the very nature of such investments takes it away from a large majority of clients for whom it simply isn’t appropriate on grounds of risk alone. So for whom is longer term venture capital investing suitable in the eyes of the FCA? What investment structures will be wrapped around this asset class and how will it be viewed in the eyes of PI Insurers? No wonder IFAs are in something of a quandary. On this basis, how does that possibly translate into more capital becoming available to support businesses with their scale up plans and thus achieve the ambitions of the Review?

Culturally, as things stand, this is a systemic issue where under the regulatory gaze advisers would be between a rock and hard place in recommending products which have such little known quantity and may have an investment term well into a second decade.

The vast majority within an IFA client bank are encouraged towards ‘needs based’ or ‘goal based’ planning and not many could take such a long term approach with little or no knowledge about the likely out-turn. I haven’t come across many investors who don’t want some degree of predictability about what will be achieved 3-5 years hence and require monthly updates en route. Let’s not get into valuation and liquidity territory of something that could run for 15 years! Pension investors with a higher risk appetite in return for slightly enhanced tax treatments? Even then the possibility of committing significantly only to reach maturity with zero time to correct any shortcomings in total value will surely limit exposure to Patient Capital type investments.

None of this persuades me that the population of investors attracted to Patient Capital will be significantly greater than is currently the case unless the Review conjures up something pretty radical.

Is patience really always a virtue?

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