“ Venture Capital Trusts - What are they and when should they form part of your investment portfolio? „
Financial Utilities Softwares We as a import-export company do lot of banking , our company has a Accounts Manager appointed in the bank for us if we face unnecessary delays in dealings we approach him, which solves most of everything, we have a banking transactions terminal in our office, we dont go to bank window, we want to make a cheque, transfer of funds, letter of credit, authorization to company personnell on case to case basis to our branches incharge, we do it sitting at the bank computer in our office. it is a very powerful software, the computer directly connects to the main frame of the bank head office, it has many security options added on by the bank programmers, its called Hexagon, We see all our accounts transaction from our office and everything can be printed out on our printers. This is just a peep into shape of things out there, now we go on to the subject of software available in markets for various financial functions, I give some of them as a list below : QUANTLAB (ALGORITHMICA RESEARCH) This software does quantitative analysis, users can price, trade, promote financial transactions, it is in use by portfolio managers at trading desks and clients use it as a front end, it is available in europe. This software has (API) application programming interface capabilities. AUTODEAL (COGNOTEC) This is Foreign Exchange software, it has functions like Autodeal, Market rate manager, This works almost like a trader, its in use by Standard Chartered Bank and JP Morgan. HiPortfolio/3 (DST INTERNATIONAL) Financial Services integrated solutions can be done thru this software, it is in use by top fund managers, it has reporting programme called HiReporting. ConteX (MIGHTER GISSING) Pricing engine for fixed income, this software send data automatically in correct formats to multiple vendors. Its being used by Merrill Lynch, Abn Amro, Royal Bank of Scotland. Endur, Findur (OPENLINK) Risk Management software, Uk Mortgage Bank, and others using it. ORACLE FINANCIAL SERVICE APPLICATION (ORACLE) Risk analysis, assessements of customer, product and channel profitablity, mid-size banks use this along with many others. LIQUIDATOR (ORC) Electronic trader, its a market making, trading, brokerage software across all asset classes. The software can do pre-trade analysis execution and risk management. This software allows to trade on multiple markets, it is being used by OKO bank of finland and many others. TOPS (SAVVYSOFT) This software has been involved in many hundred billion dollars worth of trades upto now. This is useful in pricing and hedging vanilla and OTC derivatives. Its being used by Export Development Bank of Canada. Savvysoft has complementary products such as stars, turbo excel (Stars= is a integration system) (Turbo Excel= speeds up calculations and spread sheet integration) RISQUE (SOPHIS) It has both sell side of Portfolio Management and buy side. It has Risk Management options, Fund Management processess its clients are Barclays, Capital, HSBC, ING and Royal bank of Canada and others. SUPERDERIVATIVES (SUPERDERIVATIVES) Pricing options software , it helps in knowing market price and also has functions to hold or sell. It is being used by large global banks and as well as smaller institutions and others. T24 (nee GLOBUS) (TEMENOS) Banking technology software, built by Citibank and sold it to temenos, it is doing business worth US$ 170 Million. REALTICK (TOWNSEND ANALYTICS) Real-Time Maket data access from vendor or user choice and can route the trade through numerous stock exchanges or electronic communications networks (ECNs) Users can manage multiple asset classes on a single platform. YOLUS (YOLUS) Risk Management Software, its clients are Allianz Dresdner Bank, Dresdner Kleinwort Wasserstein, Fimat and others. These are very specilized and costly softwares , I have given above software names along with the company names which have made it, so that in case of requirement companies can be searched. I also noticed that Yahoo search engines robots access dooyoo and bring back links from DOOYOO on the words being searched, even if the words are inside the reviews the link is brought with the name of Review writer. So why not give more terminology to Yahoo Search Engines.
How much of a risk are you prepared to take? Are you a cautious sort of person who likes to know that their money is absolutely safe? Many years ago I worked in a Bank, and each week a lady would come in and ask to see her money. There wasn’t that much of it, but each week some unlucky cashier had to get that amount of money out of the till and put it on the counter for her to see. When she’d checked it (and she counted it all!) she’d walk out and that would be that until next week. She was what you might call a very cautious investor and on the ladder of risk she wasn’t all that happy about getting onto the very bottom rung – putting her money in a Bank or Building Society account. On this lowest rung of the ladder you’ll also find fixed rate bonds and Gilts (provided that they’re held from issue to maturity). One gentle step up the ladder of risk you’ll find Zero-Dividend Preference Shares, Gilts (if you’re buying and selling them other than at issue and maturity), distribution bonds and corporate bond funds. The text books would also tell you that with-profits bonds should also go on this rung of the ladder, but I’m more than a little nervous of the whole concept of with-profits bonds at the moment, and I’d prefer to put them one rung higher, in the medium risk category. Also on this medium risk rung you’ll find the mainstream unit trusts and investment trusts together with individually held corporate bonds. After this you’re starting to get quite high up the ladder of risk. If you’re painting the side of the house you’re now painting under the eaves – sheltered from a lot of the weather, but you’re always worried that the ladder isn’t quite safe. Up there with you are direct investment in the stock market, specialist unit trusts and investment trusts and split-capital investment. You’re not starting to fee l dizzy yet are you? I do hope not. Now I’d like you to climb right onto the top rung of the ladder, hold the paint pot in one hand and lean sideways to paint that bit by the chimney. Strange how it always feels very windy up there isn’t it? Well, up there with you are Venture Capital Trusts. They’re a very risky investment, but one that has a correspondingly high growth potential. So what is Venture Capital? It’s primarily used to finance smaller companies and start-up enterprises, but is also frequently used to finance management buy-outs when the employees of a company want to buy the company to run it for themselves. One of the biggest Venture Capital organisations in the UK is Investors in Industry or the 3i Group as it’s more commonly known. You may wonder why I mention this company in particular. Well back in October 1999 our own DooYoo was founded with start-up capital from 3i and another group called Earlybird. It was originally founded in Germany but in May 2000 the groups provided further capital of £17 million to finance expansion into the UK, France, Italy and Spain and in May this year they provided further financing and the company will be looking to make a profit in the final quarter of this year. Now if that’s the case it looks as though DooYoo will have been a good investment for the Venture Capitalists, but not every company in which they invest does that well. An awful lot fall flat on their faces and the money is lost. Direct investment is very risky for the novice investor but the risk can be spread by making an investment in a Venture Capital Trust. A VCT will invest in smaller, unquoted companies and companies quoted on the Alternative Investment Market, or AIM, as it’s commonly known. Because the investment is spread over a lot of companies the individual investor is cushioned if one company fails. You still think it sounds a bit risky? Mm, yes, it is , but the Government really wants individuals to invest in these young companies – because they’re the ones that grow into the big companies who employ lots of people, so they’re prepared to offer some very generous tax incentives to people who make investments in Venture Capital. The first incentive they offer is Income Tax relief of 20% on the amount invested up to a maximum of £100,000. A little more than you had in mind? Well you can invest as little as £3000 in some Venture Capital Trusts. If you made the minimum investment you’d have a tax repayment of £600 available. You can also defer Capital Gains of up to 40%, so if you’ve made a chargeable capital gain and the money is re-invested in Venture Capital you don’t have to pay the tax, which could reduce the cost by a further £1200, so in the right circumstances the £3000 investment could cost as little as £1200. The next incentive is that there’s no income tax to pay on any dividends you receive (and if you arrange for dividends to be re-invested in the Venture Capital Fund you’ll also get tax relief of 20% on the amount re-invested). There are also no capital gains to pay if you sell your investment at a profit. It’s beginning to sound a little more tempting, isn’t it? Do remember though, that the tax tail should never wag the investment dog: never make an investment because you’ll get tax relief. Go for a good investment and take the tax relief as a bonus. Who should be investing in Venture Capital Trusts? Anyone who has already got a good spread of investments on the rungs of the ladder of risk should consider this, but only with relatively small amounts. My personal view is that 10% of your total investments would be an absolute maximum, but much will depend on your age and personal circumstances. It’s not unreasonable for a 25-year-old with no dependants and a good income to invest substantial sum s in Venture Capital, but it would be the height of folly for a 65-year-old to invest the family’s savings in the same thing. If you are thinking about this you should seek the advice of a good Independent Financial Adviser, but as a rule of thumb, just think back to when I was describing you being on the top of the ladder leaning over to paint the chimney. Were the palms of your hands perspiring? If they were, don’t even think about it! Good luck!