Portfolio valuation graph (December 2016)
Mercia has successfully launched and fully invested six EIS & SEIS hybrid funds, with the majority performing on or ahead of target. An additional two funds have also been launched, which are investing in the 2016/17 tax year.
Using traditional International Private Equity and Venture Capital (IPEVC) valuation tools, MGF1, MGF2, MGF3 and MDF (Mercia Digital Fund) are each meeting or exceeding growth targets. MGF4 and UGF (University Growth Fund) finished investing in April 2016.
The current performance can be seen in the graph above (with and without tax advantages).
Tax relief shown includes initial income tax relief and any loss relief on portfolio failures (calculated for additional rate tax payers). Capital gains deferrals or exemptions are not illustrated.
Mercia Growth Fund 7 will target a return of three times invested capital after five to seven years*, with portfolio exits driven between years 3-7 (EIS projected between years 3-5 and SEIS between years 4-7).
*target is based on net cost, after all available tax reliefs, based on 15% investment in SEIS qualifying companies.
Performance of EIS companies versus Seed (SEIS)
The following table illustrates the relative performance of Mercia’s funds, analysed between the SEIS and EIS element. In aggregate the funds have invested in 56 companies, of which 42 have received SEIS investment. It is notable that, despite the enhanced upfront SEIS tax reliefs, the average performance after 25 months for EIS companies is substantially higher. The duration between an investment and the investor receiving a tax certificate is shorter for an EIS investment (due to qualification requirements). Furthermore, as an EIS company is often at a later stage of development, the company will often be closer in time frame to a potential exit.