Back the next Microsoft

Get in early via investment trusts, says Simon Lund

Have you ever wondered what your life would be like if you had been one of the original investors in Microsoft? Most of us do not get the chance to invest in companies until they are well established and have been listed on a stock exchange. But that means you have missed the early years of rapid growth and development.

Access to companies while they are still private has traditionally been through investment in venture capital, or private equity. This is done through specialist international pooled funds, or through a fund of funds, which in turn makes investments in private equity funds.

The entry levels to specialist funds are high - typically a minimum investment of pounds 3m per fund, fixed for a 10-year period - but UK investors can buy into this sector through investment trusts that accept from pounds 50 a month.

Private equity investment trusts listed on the London Stock Exchange range in size and specialisation. You will have heard of 3i, worth more than pounds 3bn. Others include Electra (subject of a hostile bid by 3i), Candover and Foreign & Colonial Enterprise. They have rewarded long-term investors handsomely: a pounds 100 investment in Candover 10 years ago would now be worth pounds 705, in F&C Enterprise pounds 1,029.

Investment trusts are often undervalued in comparison to the total value of their underlying investments- currently an average of 12 per cent less. To use the jargon, they are at a 12 per cent discount to net asset value. For every pounds 1 invested you actually get pounds 1.12 worth of assets. Interestingly, discounts on private equity investment trusts range from 52 per cent to a premium of 11 per cent (in the case of 3i).

Schroder Ventures International Investment Trust (SVIIT) and Pantheon International Participations (PIP) are slightly different as they are international fund of funds. Unlike typical investment trusts, which back other companies directly, a fund of funds investment trust puts money into a portfolio of private equity funds, which in turn invest in companies.

Private equity in any form is not for the safety-first investor because of the risk involved. But, historically, significant gains have been made from taking that risk over a long period of time. Using a fund of funds approach also spreads the risk around many companies: Schroders invests in 157 companies and PIP has more than 1,000 underlying companies..

Investors get a return on their cash when the underlying companies are floated on the stock market or the firm is taken over.

Simon Lund works for Schroder Ventures.

HOW TO INVEST

You can buy shares in venture capital trusts via any stockbroker.

Pantheon International Participation runs an investment trust savings scheme, minimum pounds 50 a month. It can be held in a tax-free individual savings account(up to pounds 7,000 for 1999/2000). Call 0171-484 6200.

SVIIT accepts from pounds 50 a month into its investment trust savings scheme. It can be held in an ISA. Call 0171- 658 6742.

F&C Enterprise savings scheme from pounds 50 per month. Call 0171-454 1415.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Content Writer - Global Financial Services

£25000 - £30000 per annum: Recruitment Genius: From modest beginnings the comp...

Recruitment Genius: Web Developer - PHP

£35000 - £40000 per annum: Recruitment Genius: From modest beginnings the comp...

Recruitment Genius: Field Sales Consultant - Financial Services - OTE £65,000

£15000 - £65000 per annum: Recruitment Genius: This is an exciting opportunity...

Recruitment Genius: Loan Underwriter

£18000 - £20000 per annum: Recruitment Genius: This is a fantastic opportunity...

Day In a Page

A nap a day could save your life - and here's why

A nap a day could save your life

A midday nap is 'associated with reduced blood pressure'
If men are so obsessed by sex, why do they clam up when confronted with the grisly realities?

If men are so obsessed by sex...

...why do they clam up when confronted with the grisly realities?
The comedy titans of Avalon on their attempt to save BBC3

Jon Thoday and Richard Allen-Turner

The comedy titans of Avalon on their attempt to save BBC3
The bathing machine is back... but with a difference

Rolling in the deep

The bathing machine is back but with a difference
Part-privatised tests, new age limits, driverless cars: Tories plot motoring revolution

Conservatives plot a motoring revolution

Draft report reveals biggest reform to regulations since driving test introduced in 1935
The Silk Roads that trace civilisation: Long before the West rose to power, Asian pathways were connecting peoples and places

The Silk Roads that trace civilisation

Long before the West rose to power, Asian pathways were connecting peoples and places
House of Lords: Outcry as donors, fixers and MPs caught up in expenses scandal are ennobled

The honours that shame Britain

Outcry as donors, fixers and MPs caught up in expenses scandal are ennobled
When it comes to street harassment, we need to talk about race

'When it comes to street harassment, we need to talk about race'

Why are black men living the stereotypes and why are we letting them get away with it?
International Tap Festival: Forget Fred Astaire and Ginger Rogers - this dancing is improvised, spontaneous and rhythmic

International Tap Festival comes to the UK

Forget Fred Astaire and Ginger Rogers - this dancing is improvised, spontaneous and rhythmic
War with Isis: Is Turkey's buffer zone in Syria a matter of self-defence – or just anti-Kurd?

Turkey's buffer zone in Syria: self-defence – or just anti-Kurd?

Ankara accused of exacerbating racial division by allowing Turkmen minority to cross the border
Doris Lessing: Acclaimed novelist was kept under MI5 observation for 18 years, newly released papers show

'A subversive brothel keeper and Communist'

Acclaimed novelist Doris Lessing was kept under MI5 observation for 18 years, newly released papers show
Big Blue Live: BBC's Springwatch offshoot swaps back gardens for California's Monterey Bay

BBC heads to the Californian coast

The Big Blue Live crew is preparing for the first of three episodes on Sunday night, filming from boats, planes and an aquarium studio
Austin Bidwell: The Victorian fraudster who shook the Bank of England with the most daring forgery the world had known

Victorian fraudster who shook the Bank of England

Conman Austin Bidwell. was a heartless cad who carried out the most daring forgery the world had known
Car hacking scandal: Security designed to stop thieves hot-wiring almost every modern motor has been cracked

Car hacking scandal

Security designed to stop thieves hot-wiring almost every modern motor has been cracked
10 best placemats

Take your seat: 10 best placemats

Protect your table and dine in style with a bold new accessory