The EIS sector is more than a quarter of a century old. This item takes a fresh look at what these investment structures can do in areas such as media and the creative sectors.
Here is a guest article about the Enterprise Investment Schemes sector in the UK by Dan Perkins, a director at Great Point, the media and investment firm.
The EIS sector is complex and there isn’t, as Perkins told this publication, a “one-stop-shop” to analyse past performance data across managers, and certainly this is an area that the whole industry needs to work on. As he also told us, most high-quality, respected managers in the EIS market are more than happy to share their past performance data (both good and bad) with investors should they be considering making an investment.
Investors can consult independent research reports from houses such as Tax Efficient Review, MJHudsonAllenbridge, MICAP and Hardman & Co to gain further insight into past performance and the credibility of the relevant manager’s proposed investment strategy. Perkins also says that it “always a good idea” to seek professional advice from either a financial advisor or wealth manager, who will have done their own research into which schemes they believe to be best of breed.
He also suggests that investors should focus on the following areas: governance structures – how robust is the manager’s compliance and governance framework? Is there independent oversight on the investment process? Sector expertise – how long has the management team operated in the sector they are proposing to invest into?; Fees – are they competitive? Are they fully disclosed and transparent? Does the fee structure align the interests of the manager with those of the investor?
Lastly, Perkins says that investors should diversify and spread investments across different managers and asset classes.
So, with these points out of the way, here is Dan’s article. The editors of this news service do not necessarily endorse all views of guest writers. To respond and jump into debate, email firstname.lastname@example.org and email@example.com
Enterprise Investment Schemes celebrate their 25th anniversary this year. Created in 1994, the tax reliefs of then Chancellor Ken Clarke were designed to encourage investments in small unquoted, early stage, high growth, entrepreneurial companies.
Some £18 billion ($23.3 billion) worth of investment later, EIS continues to be an enormous success story for the British economy, investee companies and investors alike. One of the biggest beneficiaries over that period has been the UK’s media sector.
However, investment into media-based opportunities has been tarnished in the eyes of many in the wealth advice community with historic, unapproved “film partnership” arrangements marketed in the late 1990s and early 2000s, subsequently being viewed as tax avoidance schemes for wealthy investors, making front page headlines and causing more than a few problems for the advisor community.
Yet the current EIS landscape is a world away from those arrangements. HMRC’s advance assurance process acts a pre-qualification test where companies must meet specific criteria to qualify for EIS investment. Under these measures – as refined by the Patient Capital Review and subsequently implemented through the “risk to capital” requirements – the emphasis has been placed firmly on the use of EIS for growth-oriented businesses only.
While some saw this amendment as a potential hammer blow for media-based EIS investing, we are finding the opposite to be true because the sector’s fundamentals are so compelling.
Between 2010 and 2017, the UK’s creative industries saw its Gross Value Added (GVA) to the UK economy increase by 53.1 per cent - outstripping the 29.7% increase in the economy as a whole over the same period. Elsewhere provisional numbers from the Department for Digital, Culture, Media and Sport suggests that the UK’s creative industries contributed £101.5 billion of value to the domestic economy in 2017 alone.
Factor in that the sector employs over 2 million people in the UK and a voracious, growing consumer appetite for creative and entertainment media content globally (Netflix and Amazon spent a combined $13 billion on content in 2018 alone) and you can start to see why we believe the sector represents a major investment opportunity.