At CityOne Securities we never forget that the main reason for investing is to provide a investors with a better return on their money.  With this in mind, it is worth pointing out that Private Equity as a sector has performed exceptionally well over the last ten years. According to the British Venture Capital Association - Generalist Private Equity Funds have produced average returns of 41.8% per annum. Whilst this figure may appear implausibly high, this is achievable because the potential for higher growth is often much greater at the earlier stages of a company’s lifespan, before the company becomes quoted or listed on the stock market;  the risks involved are, however, correspondingly higher.

Investors can take advantage of significant tax breaks with investments that qualify for the Enterprise Investment Scheme (EIS), such as Income Tax relief, exemption from Capital Gains Tax, loss relief, and exemption from Inheritance Tax (for full details click here).

When purchasing shares in fully listed companies there is usually a restriction in the number of shares that can be purchased. This can be coupled with dealing costs and onerous share spreads between the buy and sell price. None of these costs/restrictions is present when subscribing for equity on a pre-IPO basis.

Investors holding liquid funds within their pensions can invest a percentage of these in unquoted securities. Currently, any gain arising from the sale of an investment is free of capital gains tax.  

Investments in unquoted companies should be considered higher risk investments than fully listed securities or shares. Investors should be prepared to take a medium to long term view on these types of investments (for more information on the risks involved click here).

CityOne Securities is authorised and regulated by the Financial Services Authority.