Partner Insight: Strong performance and lower fees have propelled the use of EIS strategies by advisers in recent years, and for advisers, investors and providers alike there has been a "paradigm shift in the sector," according to Jack Rose, head of tax-efficient products at LightTower Partners.
He points out that for many years the sector was dominated by products that had significant assets or contracts in place that were designed to limit the downside for investors over the shortest investment time period as possible.
"These products usually had limited upside, but that wasn't really the point of them," says Rose.
"They were invested in for predominantly financial planning reasons, especially around Capital Gains Tax (CGT) deferral and estate planning."
The landscape is very different now, however.
"We are left with what the essence of EIS should be - risk capital and supporting SMEs," says Rose.
"And the timeframe and risk profile is substantially different to the days of the past. This has meant a period of substantial change for advisers on how they position it with clients and for whom it is relevant and appropriate for."
For Velocity Capital Advisors, which launched three years ago, their investment philosophy is to look for innovation that resonates with the customers.
However, Rajeev Saxena, founder and managing director suggests that Velocity are not fund managers in the traditional sense, but rather the company views itself very much as co-investors, with all the founders having previously been entrepreneurs in the creative and marketing spheres.
"That's why we think we are different; we haven't just managed funds, we have built up businesses," explains
"We think we are unique in EIS because we ourselves invest in these businesses. We are aligned with the management and our investors."
Click here to read the full interview and more on how EIS providers are generating returns up to five times their original investments.
