Best and worst: Venture & Development Capital Trusts

THE partial flotation of 3i, the venture capital company, has cast a spotlight on the area of unquoted company securities. Investing in such companies has the potential for tremendous gains. The downside is the chance of severe losses if one or more of them goes belly up.

There are at present 21 investment trusts based on unquoted companies. In the 12 months to 1 June the average trust in this sector has grown by 41 per cent. Over three years the return has been 72 per cent. But over five years average returns were 53 per cent - less than the three-year performance.

Among the best over three years has been Manakin Holdings, managed by Abingworth, a venture capital company. David Quysner, managing director, explained: 'The valuation of unquoted companies has to be quite conservative, because it is carried out by the venture capital company itself. In our case the increase has been because the fund is in liquidation, and what we are seeing is its value being realised as our assets are sold or publicly floated.'

There are some far weaker performances. The East German trust of Ermgassen, a German fund manager, has placed last over each of the past three years. No one at Ermgassen was prepared to comment on its strategy.

A pounds 100 investment in the Worth fund, managed by Aberdeen Trust, would only have grown to pounds 111.65 over the three years. Martin Gilbert, chief executive, said many of the investments in the luxury goods fund had been write- offs. Another of its venture funds, Abtrust Scotland, has placed fifth over three years.

----------------------------------------------------------------- VENTURE & DEVELOPMENT CAPITAL TRUSTS ----------------------------------------------------------------- The best pounds 1 Manakin Holdings 327.99 2 Group Development 238.38 3 Pantheon International 224.27 4 Foreign & Colonial Enterprise 204.19 5 Abtrust Scotland 193.64 The worst 17 Kleinwort Development 129.35 18 English & Caledonian 126.82 19 Radiotrust 118.18 20 Worth 111.65 21 East German 73.07 The table shows the value on 1 June 1994 of pounds 100 invested three years earlier, with income reinvested. ----------------------------------------------------------------- Source: Micropal -----------------------------------------------------------------