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Stellar Nova EIS Fund is a fund that aims to invest in 10 companies that are eligible for EIS or SEIS relief. The target return for each investee company is a six-year return of £2.85 after tax relief for each £1 invested. Returns will be focused on capital gains, and investors are unlikely to receive any dividends. The aim is for the assets to be invested as soon as possible after receipt.

Why invest

Positives

  • Strategy: To invest in a portfolio of technology companies, with a unique support infrastructure provided before and after investment.

Issues

  • New fund: This is a newly launched fund, but builds on the existing infrastructure from Nova.

The investment administrator

Positives

  • Team: The experienced management group has spent a decade honing its methodology, supported by a large team of specialists. Stellar will bring an additional overlay to Nova’s team.

Issues

  • Past performance:  While the team has produced an impressive IRR on an unrealised basis, there have only been three exits to date.

Nuts & bolts

  • Offer period: The fund is evergreen, with deployments each month, and expected full deployment within a quarter.
  • Diversification: Primarily EIS investments, with an option to have SEIS investments as well. The aim is to invest in seven to ten companies.
  • Valuation: Investors will have access to an in-house online system, which will be updated on an ongoing basis.

Fees

  • Fees: All fees, apart from the performance fee, are charged directly to companies.
  • Performance fee: 20% on gains over a return of 120% of total capital invested.

Risks

  • Risk mitigation: Nova’s focus is on using the support it provides to mitigate the investment risk of investing in new startups. There is some evidence that this is effective.
  • Target return:  Overall, as is normal for (S)EIS funds, the strategy is high-risk, with a six-year return target of £2.85 (including tax relief). Individual investments will have a higher target, offset by a proportion of failures.
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If you'd like to be introduced to the team at Stellar Asset Management Limited/Nova Growth Capital Limited, get in touch.

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