Corporate Venture Capital Can Be a Blessing or a Curse. Here’s What Every Entrepreneur Should Consider.

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Considering corporate investment for your company? If so, you’re not alone. Last year, the combined value of corporate venture capital financing hit $64.9 billion. That’s a ten-year high and a sign that companies are doubling down on startup investments in pursuit of innovation.

Still, knowing whether a corporate investment is right for you and your company takes some careful consideration.

Understanding corporate venture capital

While corporate VC is a subset of venture capital, they are not the same. Corporate VC investments typically leverage the company’s balance sheet to make direct equity investments, rather than investing through a fund. Additionally, the corporation usually offers a range of other strategic opportunities for the startup beyond cash, including accelerator-like mentorship and guidance, access to certain tech or business development resources , and even the potential to become one of the startup’s all-important initial or marquee customers.

Read more on Entrepreneur

FTSE Supermarkets Split On The Amazon Effect

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Greek deal buoys European stocks

The shock sensation that the Bank of England could finally be about to lift UK interest rates died down on Friday. If monetary tightening spreads beyond US shores, that’s when global stock markets could start to become unstuck. Sentiment was lifted by an agreement between Greece and its international creditors that should remove the threat of another debt default next month.

FTSE supermarkets split on Amazon-effect

The FTSE 100 ends the week well off the one-month lows reached on Thursday but further gains could be tough since higher rates would naturally make UK equities less attractive.

Tesco (LON:TSCO) shares managed a spectacular 180 degree change in fortunes on Friday. Investors flipped from satisfaction at the highest sales growth in seven years to fears that Amazon (NASDAQ:AMZN) could knock Tesco off its perch as Britain’s number one supermarket. Amazon’s $13.7bn purchase of US natural food store Whole Foods (NASDAQ:WFM) marks the entrance of a major new player into the supermarket space.

 

Read more on UK Investing

Stocks that are an investor’s best friend

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The Safer Dogs of the TSX returned from their vacation this week. The occasion prompted me to take a closer look at the developments in the world of the high-yield blue-chip stocks over the last six weeks.

Seven stocks passed the Safer Dogs test on both April 26 and June 8. They are: the Bank of Nova Scotia (BNS), BCE (BCE), CIBC (CM), National Bank (NA), Power Corp. (POW), Shaw (SJR.B), and TELUS (T). All should be familiar names. The newcomers this time around are: the Bank of Montreal (BMO), Emera (EMA), and Sun Life Financial (SLF).

Back in April the highest dividend yield of 4.58% was offered by both CIBC and BCE. This time around Power Corp took home top prize with a dividend yield of 4.96%. Dividend yields also climbed at the bottom end of the pack with April’s Royal Bank (RY) yielding 3.65% and June’s Sun Life yielding 3.82%. Overall, the Safer Dogs provided an average dividend yield of 4.09% in April and 4.32% in June. The average dividend yield climbed by 23 basis points over the period.

 

Read more on Money Sense

Technology sell-off weighs on Britain’s FTSE

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By Helen Reid

LONDON, June 12 (Reuters) – British shares fell on Monday as a technology sell-off spread across Europe, while contractor Mitie jumped after forecasting a recovery in its fortunes.

Britain’s FTSE 100 dropped 0.3 percent by 1000 GMT, with investors dumping tech and other cyclical stocks, which feature heavily on the blue-chip index, and heading into defensive sectors.

Software company Micro Focus and accounting platform provider Sage Group were the biggest blue-chip fallers, taken down by a pan-European tech sector set for its worst day since the post-Brexit sell-off a year ago.

Read more on UK Reuters

Sector movers: Retailers in the red as consumer spending worries worsen

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Retailers were the big drag on the FTSE 350 today as survey data showed households continued to show caution on spending.

UK households spent less for the second month in a row in June, Visa said in its monthly consumer spending index, dropping to its lowest quarterly level for three and a half years.

There was a 5.8% decline for transport & communication, a 3.4% fall for household goods, a first monthly drop for recreation & culture in four years and and a much smaller dip for clothing & footwear than than the previous month’s five-year plunge.

 

Read more on Digital Look

Layered ideas fuel positive returns

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The liquid alternative strategy’s two objectives consist of delivering a return target of cash +5 per cent over the long-term, and reducing half of the volatility in global equities over a rolling three-year period.

INVESCO head of sales, Eben Bowditch, said to achieve the objectives, the fund had a two to three year investment outlook on 25 to 30 ideas that had different investment goals.

“We call them ideas but essentially they’re trades or positions and each one of those positions are designed to operate a positive return,” he said.

“The fund’s philosophy is to find ideas in any asset class. It’s an unconstrained research approach that’s managed in a robust risk framework.

“So the fund is a genuine multi-asset that can invest in volatility, inflation instruments, equities, currencies, fixed interest, credits, and real estate proxies. It invests in just about every asset class that’s possible in a liquid format.”

 

Read more on Money Management

Cashing in on stage and screen: an investor’s guide

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It was an investment opportunity with a difference. Nearly 20 years ago, Nick Archer spotted a chance to be involved in funding and filming a low-budget movie.

Intrigued, the private equity executive injected £1,000 in the film project called Out of Depth that set out to tell the story of a “poor boy made good”. He soon found himself on camera, mingling with actors in a pub scene exploring the life of an East End gangster.

“That very first experience was magical,” he says. “It was so far removed from my day-to-day job in financial services. It was a bit of an escape.”

The film had a premiere in London’s West End but was not a financial success. Even so, Mr Archer was hooked. Since then, he has been an enthusiastic backer of the arts — helping two more films and about 80 plays get off the ground — as a sideline to his other personal investment activities in the financial markets.

The experience has been a rollercoaster ride with many losses and a few big hits. One of the successes was Billy Elliot, a stage musical about a coal miner’s son who becomes a professional ballet dancer. As well as getting his capital back, he went on to almost triple his stake over the 10-year run.

Investing in film and theatre is high risk, he says. When he backs a production he does so without any expectation of making money. Even so, he detects some encouraging trends. “Audiences have picked up. I like to think it’s slightly more profitable for us than it used to be.”

He is not alone in being upbeat about the sector. “The UK’s creative economy stands tall on the world stage,” said James Murdoch, chief executive of 21st Century Fox, in February. Last year, a record £1.6bn was spent on film production in the UK, up 13 per cent on the previous year. West End box-office receipts have more than doubled since the turn of the century. Overall, the creative industries is one of the fastest-growing sectors of the economy. Yet for all its glitz and glamour, it is often difficult for investors to make money in the entertainment sector. Those considering getting involved need to ask some hard questions. How much can they afford to lose? How best to judge the risks and minimise or spread them? How far should tax breaks influence their investment decisions? How can outsiders get a slice of the most promising projects?

 

read the full article on Financial Times

The fall in small business investment via the Enterprise Investment Scheme matters to us all

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Is investor appetite for the Enterprise Investment Scheme (EIS) waning? It would appear so, from recent news that there has been a sharp drop in the funding small businesses raised through EIS last year.

Though the total figure is still high at £1.6bn, it is down by 12 per cent from £1.9bn the year before, largely due to a tightening of the rules in 2015. The environment has become more challenging for companies seeking vital investment funds and investors looking for decent returns on their capital – but the implications are wider-reaching.

Consider what EIS is actually for. Designed to help smaller businesses raise finance by offering generous tax reliefs to investors, the Government’s ultimate goal is to help boost economic growth, drive innovation and stimulate job creation (and tax revenues) for the greater good of UK plc. This fall suggests that the changes made to the scheme may be undermining this aim.

New rules

The new rules mean that companies which have been trading for more than seven years are no longer eligible except in very restricted circumstances. Investors can now only benefit if they invest in higher-risk start-ups and early stage companies rather than more established growing businesses, as before. The problem is, many do not have the desire or risk profile to do so, given the higher failure rate of such deals.

The changes were triggered by a need to clamp down on misuse of the scheme by “artificial structures” whose primary purpose is to obtain tax relief rather than to support genuine trading growth. Although there was a clear need to do so, there’s a real risk that the tightening of the scheme has gone too far and dampened demand from what is clearly a willing investor base.

Small businesses that have been trading successfully for some time need investment just as much as new companies if they are to capitalise on growth opportunities. They also tend to be more significant contributors to the economy via taxation and employment. Take the example of one of our portfolio companies – a major coffee chain franchisee company called 23.5 Degrees Ltd. Since our investment under two years ago (which was EIS qualifying), the number of staff it employs has quadrupled to over 500 as it rolls out its expansion plans. However, it’s unlikely the investment would qualify for EIS today.

Other benefits

That said, it’s also true that a lack of tax breaks should not deter investors if the investment proposition is sound in its own right, offering a good quality deal in a strong business with potential to deliver real returns. There can be a whole host of reasons why a deal is attractive, and tax breaks should never be the driver for investment.

Nevertheless, it’s a shame that fewer companies are now able to use EIS as a selling-point to get the funding they need to take their business to the next stage. If the downward trend continues, the UK economy will be the poorer for it.

 

read more on City A.M.

EIS: an investment scheme for the sophisticated investor

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You may not have heard of the Enterprise Investment Scheme, even though it has been around for 22 years. In simple terms, it’s a scheme offering big tax advantages for investing in UK early-stage businesses. It’s one for the sophisticated investor though, as investing in start-ups and new companies comes with higher risks.

The Enterprise Investment Scheme (EIS) was launched by John Major’s conservative government in 1994 to encourage investment into UK smaller, higher-risk companies. Investors get significant tax advantages in return for including these investments in their portfolios.

Any UK investor can apply, but the general profile of an EIS investor is someone who already has an investment portfolio and most of that will be balanced between equities, bonds or ETF structures, says Charles Owen, founder and director of CoInvestor, an investment platform providing access to the EIS. They’re seeking to add an additional element to their portfolios, like non-correlated capital growth or the tax advantages on offer, he says, and they understand the risks involved.

 

read the full article on IG

There is a party in alternative income and equity trusts aren’t invited

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Just how difficult is it to raise a new equity investment trust at the moment? Downing LLP has announced it has raised £55.6 million for Downing Strategic Micro-Cap (DSM), well short of the £100 million it was seeking.

The company gamely pointed out it had surpassed the minimum £35 million it needed for a viable flotation. Nevertheless, the result must be a disappointment given the launch seemed to have everything going for it including a £10 million seed investment from a Downing venture capital trust.

With a well-known and respected fund manager (Citywire AA-rated Judith MacKenzie), a compelling investment story (under-researched, good value, growth stocks at the bottom of the UK stock market food chain) and the marketing support of Hargreaves Lansdown and Alliance Trust Savings, Downing must have thought it could do better than Miton (MINI) and River & Mercantile (RMMC) which both raised around £50 million for their micro-cap trust launches in 2014 and 2015.

 

Read more on City Wire