With dozens of providers to choose from, each with their own slant on the market, the task is by no means an easy one.
For many, it is made a little simpler by using the data and ratings of the reviewers.
Tax-advantaged products must be considered as investments and not purely tax led.
Clearly there is a mine of information from these sources, but even then, comparing apples with apples is extremely difficult, and most often the decision will come down to instinct.
Asking each firm which factors they consider to be the most important when pulling their panels together is likely to provoke a whole range of different answers, which in many ways highlights the difficulty of the task.
What are your clients looking for and what matters most?
Without being tedious and despite their classification, tax-advantaged products must be considered as investments and not purely tax led.
The strategic uses for venture capital trusts and the Enterprise Investment Scheme are considerably different, but the assumption here is that clients will want their money to perform.
Much is made of deployment track record, size and experience of investment teams, sector specialisms and deal flow, all of which can easily absorb a raft of hours of research and not necessarily provide many clear conclusions.
It takes a great deal of imagination so early in a company’s life cycle to predict how and when an exit might come.
Most investors will quickly distil this and ask: what is the manager’s track record of successful exits, how much actual cash has been returned to investors, and over what time period?
In reality, these questions are the most appropriate issues to consider.
Qualifying rule changes in recent years have enabled investment in companies at a much earlier stage.
This increases the potential risks to investors as often these are early stage or start-up companies, with many not even at the point of revenue generation.
Exit considerations
Therefore, the journey to an exit can easily become a seven to 10-year haul, which may not be what most seasoned investors have been accustomed to.
Equally, it takes a great deal of imagination so early in a company’s life cycle to predict how and when an exit might come.
Managers who can clearly demonstrate a record of profitable exits and the return of cash to investors are generally much sought after.
The current economic challenges should also signpost advisers and investors towards those companies that are well funded.
