The best-performing venture capital investment trust over the past five years is managed by Foreign & Colonial. So, as it happens, is the worst. Confused? Paul Slade has the answers.

If you had put pounds 1,000 into F&C's Enterprise Trust at the end of August 1992, that money would now be worth pounds 5,295. If, on the other hand, you had plumped for the same sector's East German trust - also managed by F&C - your pounds 1,000 would now be worth just pounds 180.

In fact, F&C took over the collapsing trust from German fund managers Ermagassen only earlier this year and is currently running it "for realisation". In other words, F&C has the thankless task of trying to extract what little cash remains for shareholders before winding up the trust altogether.

But these twin examples neatly sum up the two extremes of venture capital investment. Get it right, and the rewards are high - the top UK general investment trust's equivalent return was just pounds 3,311. But get it wrong, and the results are disastrous.

F&C Ventures managing director James Nelson, who manages the Enterprise trust, says: "It's a different form of risk. We manage a more concentrated portfolio, so you haven't got as much diversification. But the other side of the coin is that we're investing in companies where we have direct contact with the managers and continuing monitoring throughout."

The Enterprise trust invests in about 60 companies, with its largest 10 stakes accounting for about 60 per cent of funds under management.

The higher degree of risk attached to venture capital investment led the last government to create a string of investment vehicles designed to give tax breaks on money going into risky start-ups or expanding companies. The most recent of these schemes, created in 1993, is the venture capital trust.

But VCTs, like Business Expansion Schemes before them, were soon hedged round with all sorts of guarantees and clever financial gimmicks which meant well-off investors could get all the tax breaks at little or no risk. In his own first Budget, on 2 July, Gordon Brown announced that a crackdown on the schemes would take effect immediately, even though the new rules themselves will not be announced until next spring.

David Oliver, a tax partner at accountants Arthur Andersen, says: "We know that there are new rules coming in, and we know that we're in them already. We just don't know what they are."

Until the details emerge, Oliver's advice is to consider only those VCTs which have no outside underwriting or any form of guarantee. "It's got to be genuine risk capital money and, therefore, money which people can afford to lose," he says. "VCTs are really for the serious investor who has got significant assets. If I had pounds 200,000 that I wanted to invest I might put, say, 10 per cent into a VCT. If pounds 20,000 was all I had, I wouldn't put it in this sort of thing."

Other forms of venture capital investment, however, may be suitable for a small part of even the most modest investor's portfolio. In Nelson's own fund - which has a savings scheme starting at pounds 25 a month - small investors now account for about 20 per cent of funds, against just 5 per cent two or three years ago.

Nelson says: "I think some people have got to the stage in assembling their portfolio, whether it's through PEPs or monthly savings schemes, where they've got all the more established or conventional funds, and are looking for something a little bit extra on the edge."