As bonds and blue chip stocks struggle to yield returns, interest rates hit an all-time low and property prices plummet, you’d be forgiven for asking, where can we turn to in search of alpha returns?
Our event last month, Where are the post-Brexit returns?, sought to address precisely this question. As many of you who attended will know, we took the opportunity to pass on an update on SyndicateRoom’s portfolio to our members.
Since 2014, SyndicateRoom’s portfolio value has seen an increase of 35% before (S)EIS tax reliefs are taken into consideration, and a 109% increase in value after (S)EIS tax reliefs are taken into consideration. Here’s what that looks like compared to FTSE, gold and real estate.
‘When Tom Britton and I started SyndicateRoom we knew exactly what we stood for: quality over quantity,’ says Gonçalo de Vasconcelos, Co-Founder and CEO of the platform. ‘For three years I’ve been advocating that success is not measured in terms of money going in but in money coming out. The strong uplift in portfolio value in such a short period of time is an incredible realisation of our principles.’
The value of the portfolio was calculated based on the change of share price, if any, for each respective company as of May 2016. This change, if any, in value of each business was calculated based on the difference between the share price paid by SyndicateRoom members at the time of the funding round via SyndicateRoom and the share price paid by independent investors during any more recent funding round. If a company has wound down, the latest share price was considered to be zero, or the value that was returned back to investors at the time of winding down.
Specifically, the value of the portfolio was calculated in two different ways. The ‘on paper’ or ‘paper’ value increase of 35% was calculated without taking into account any (S)EIS related tax reliefs. The second paper value increase – of 109% – was calculated taking into account the income tax relief associated with (S)EIS tax reliefs (which in effect reduces the amount of capital at risk for the investor).
What to bear in mind when considering these numbers
Naturally, we are all very excited about what a growing and increasingly valuable portfolio could mean for our investors, particularly where potential future cash returns are concerned.
However, when considering portfolio data it is important to bear in mind:
The numbers reflect increases in paper value, not cash returns. The appreciation in value is a reflection of the valuations that independent investors are willing to invest in our portfolio companies at in funding rounds subsequent to the funding round which involved SyndicateRoom
With no secondary market, it is very difficult for investors to realise the value of the shares they bought on SyndicateRoom until there is an exit
The numbers show the aggregate performance of the entire SyndicateRoom portfolio. They do not reflect the portfolios of individual investors. Some investors’ portfolios may be lower than the aggregate 35% increase, whilst other investors’ portfolios may be higher
Past performance is not an indicator of future results. The very nature of early-stage equity investing makes it a high-risk asset class. So, while some businesses have displayed significant increases in value, there is no guarantee that the shares in those businesses will continue to appreciate, nor is there any guarantee that investors will be able to realise value from their shares. Additionally, shares in businesses that have experienced down rounds and flat rounds may yet go on to appreciate in value and one day bring considerable returns to their investors
FTSE All-Share: http://www.londonstockexchange.com/exchange/prices-and-markets/stocks/indices/summary/summary-indices.html?index=ASX
FTSE 100: http://www.londonstockexchange.com/exchange/prices-and-markets/stocks/indices/summary/summary-indices.html?index=UKX
FTSE 250: http://www.londonstockexchange.com/exchange/prices-and-markets/stocks/indices/summary/summary-indices.html?index=MCX
Real estate: http://www.nationwide.co.uk/about/house-price-index/download-data#xtab:uk-series