In the world of Venture Capital Trusts (VCTs), both British Smaller Companies VCT (BSC) and Octopus Apollo VCT stand out as prominent players, each offering investors a route into the potentially high-growth market of UK smaller companies, coupled with attractive tax benefits. While they share a common goal of fostering growth in fledgling businesses, they differ in their investment strategies, portfolio composition, and fee structures.
Investment Strategy and Focus
British Smaller Companies VCT adopts a generalist approach, investing across a broad range of sectors.1 The trust aims to build a diversified portfolio of businesses in both established and emerging industries that demonstrate strong potential for innovation and growth.2 This strategy allows for flexibility and the ability to capitalize on opportunities wherever they may arise in the UK’s small business landscape.
In contrast, Octopus Apollo VCT has a more specialized focus on business-to-business (B2B) software companies.3 This targeted approach allows the fund managers to develop deep expertise in a specific sector, potentially leading to better investment decisions within that niche. The VCT aims to invest in companies with strong recurring revenues and scalable business models.4
Portfolio Composition
The differing investment strategies are reflected in the VCTs’ respective portfolios.
British Smaller Companies VCT’s top holdings showcase its sector-agnostic approach, with investments in companies like:
- Unbiased EC1 Limited: A platform connecting individuals with financial advisers and mortgage brokers.
- Vypr Validation Technologies Limited: A product intelligence platform.
- Xapien (via Digital Insight Technologies Ltd):5 An AI-powered research platform.
- SharpCloud Software Limited: A visual communication and collaboration software provider.
Octopus Apollo VCT’s portfolio is, as expected, heavily weighted towards technology and software businesses.6 Its key holdings include:
- N2JB Limited (trading as Natterbox):7 A cloud-based telephony system.
- Mention Me Limited: A customer referral marketing platform.
- Codebay Solutions Limited (trading as Lodgify):8 A vacation rental software provider.
- Sova Assessment Limited: A talent assessment software platform.
Performance
Both VCTs have delivered positive returns for their investors, though their performance trajectories differ.
British Smaller Companies VCT has demonstrated strong long-term performance.9 Over five years, it has delivered a share price total return of 82.0% and a NAV total return of 63.6%. Over a ten-year period, these figures are 138.3% and 119.0% respectively.
Octopus Apollo VCT has also shown robust performance, with a total return of 45.3% over the five years to January 31, 2025.10
It is important to note that past performance is not indicative of future results, and the inherent risks of investing in smaller, unquoted companies remain.
Dividends
Both VCTs aim to provide investors with a regular stream of tax-free dividends.
British Smaller Companies VCT typically pays two dividends per year. Recently, it has paid dividends of 2.00p per share.
Octopus Apollo VCT targets a dividend yield of 5% of its Net Asset Value (NAV) per year. The VCT also pays dividends twice a year.
Fees and Charges
The fee structures for both VCTs are a key consideration for investors.
| Fee Type | British Smaller Companies VCT | Octopus Apollo VCT |
| Ongoing Charge | 1.75% | Net ongoing charge of 2.39% |
| Performance Fee | Yes, 20% of returns over a hurdle | Yes, 20% of gains above a high-water mark |
| Initial Charge | 0% (net) | Can be up to 5.5% (though often reduced through offers) |
At a Glance: Key Differences
| Feature | British Smaller Companies VCT | Octopus Apollo VCT |
| Investment Strategy | Generalist, across various sectors | Specialist, focused on B2B software |
| Portfolio Focus | Diversified across industries | Concentrated in technology and software |
| 5-Year Share Price Total Return | 82.0% | N/A (Total return of 45.3% over 5 years to 31/01/25) |
| Dividend Policy | Two dividends per year | Targets a 5% annual dividend yield |
Conclusion
The choice between British Smaller Companies VCT and Octopus Apollo VCT will largely depend on an investor’s individual risk appetite and investment philosophy.
British Smaller Companies VCT may appeal to those seeking a more diversified exposure to the UK smaller companies market, with a manager who has the flexibility to invest across a wide array of sectors.
Octopus Apollo VCT is likely to be favored by investors who are bullish on the B2B software sector and are comfortable with a more concentrated portfolio. The specialist knowledge of the management team in this area could be seen as a significant advantage.