Octopus Investments is to launch a new environmental, social and governance (ESG) venture capital trust (VCT) with an initial share offer of £20m.
The Octopus Future Generations VCT will invest primarily in early-stage businesses that have strong sustainability values and drive positive change in society.
It will be the firm’s first VCT launch since the Octopus Titan VCT listed in 2007, now the biggest VCT available in the UK with £1.5bn in assets under management.
The new product will be led by Simon King, whose process of early investment into sizeable companies including well-known brands such as online fashion marketplace Depop, online house buying site Zoopla and snack firm Graze, has proven very successful, making 160% in the Titan fund since it launched.
Total return of VCT vs sector since launch
Source: FE Analytics
This new venture will differentiate from King’s previous investment strategy at Titan, instead focusing on ESG assets.
Core investment themes of the new portfolio will be based on building a more sustainable planet, empowering people and revitalising healthcare.
Simon Rogerson, chief executive of Octopus Group, said that these ESG factors will be responsible for “creating a huge opportunity for investors”.
He added: “We believe that some of the best returns in future will come from companies solving society’s biggest problems.”
This will be the firm’s second ESG product following the launch of Octopus Renewables Infrastructure Trust in 2019, which is up 8% since inception.
The 30% tax relief on VCT investments of up to £200,000 gives the new product an added appeal to investors looking to avoid paying extra fees on the returns.
Tax cuts have been a leading factor in the popularity of VCTs, with Mobeus raising £35m for its new VCT in less than 24 hours earlier this month.
Jason Hollands, managing director of corporate affairs at Bestinvest told Trustnet last week: “There are a variety of likely reasons for surging interest in VCTs, including greater restrictions on pension allowances for higher earners, tougher action against aggressive ‘loophole-driven’ tax planning and the appeal of relatively high tax-free dividends that VCTs generate in a low-yield environment.”