Bouncing Back: Defying VCTs’ Downturn with a Level Head

In the past two years, venture capital trusts in the UK have raised record amounts of funds. However, this trend is expected to reverse in the current tax year, with estimates indicating a decline of 35% to 45% compared to the previous year. This downturn is attributed to several factors such as cautious market sentiment, better returns in fixed-rate markets, and the attraction of exceptional gains in the US stock market. Despite the decline in fundraising, industry experts suggest that the market valuations of companies in the small-cap space have returned to sensible levels, offering value for investors. Furthermore, the current macroeconomic environment may encourage entrepreneurs to tap into the venture capital market. While the decline in fundraising is a concern, it is not seen as a cause for alarm, as opportunities for investment still exist, particularly in fairly priced ventures.