Anthony Hilton: A salute to the fund that only invests in businesses run by the ex-military
Saturday 15 March 2014
The week’s most interesting investment idea is a fund which will only invest in businesses run by ex-military people.
The fund itself, known rather clumsily as Time Reboot VCT, was actually launched in December, but this week published an academic study which it had sponsored, by Professor Merlin Stone. This suggested that former military personnel, because of their training, were far more likely than the average to make good entrepreneurs and managers.
The architects of the fund are sufficiently convinced for them to target growth of 70 per cent over the first five years and a doubling of investor money over 10 years. That does include tax relief, however, because it is a venture capital trust.
There is certainly an opportunity here because the report says there are two million in the UK workforce with a military background and the number becoming available will swell as a result of defence budget cuts and manpower reductions.
Of those ex-military who are already in business, nine out of 10 believe their training helped them to be more successful and over a quarter said it helped in their original fundraising. On the investor side, four in 10 believe that companies run by ex-military will perform better than the average, and there is also a slight favourable bias towards investing in companies led by ex-military people.
It will be interesting to see how it works in practice. Venture capital trusts typically are aimed at start-ups or small, growing businesses. I suspect the military are far better in small businesses where they can show leadership and set the culture from the off. In larger, established companies it can be a different story, although some 20 per cent of FTSE 100 companies have board directors and 39 per cent have some senior executives from a military background. The figures for the FTSE 250 are 11 per cent and 19 per cent respectively. Their senior colleagues like them because they say they are better at performing under pressure and better at defining and achieving goals.
One problem is that they sometimes have difficulty adjusting because they cannot get their heads round the indiscipline, the lack of teamwork and the vicious office politics which characterise a lot of private-sector companies at senior management level. The idea that ambitious executives would do what is good for them rather than what is good for the business was alien to them in the Army, but quite common in business.
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