From energy to VCT, Octopus keeps innovating
Octopus Investments | Best Investment Product Provider | Best Wealth Manager – Alternative Investments
Founded in 2000, Octopus Group has seen rapid growth in recent years and now has assets of GBP12.5 billion.
The group actually comprises eight businesses explains Steve Skelding, head of Strategic Partnerships, split into two sectors, seven within the financial services industry and then Octopus Energy. This is the energy supply and distribution business that has grown considerably over recent years.
Simon Rogerson, Christopher Hulatt, and Guy Myles founded the firm, and it remains privately held with lots of employees owning equity in the business.
“Simon has a mantra of looking at industries that are broken and trying to fix them,” Skelding says. “Not many people love an energy supplier and it was a sector ripe for a disruptor, so we bought a small energy supply business and that has gone global and from strength to strength.”
Skelding also reports that the funds business has had a very healthy year with money flowing into smaller companies and the other sectors that the firm invests in.
“Venture capital has aged well, and we deal with thousands of wealth and financial advisers and find that what was a niche historically feels a lot higher up the agenda and is part of a client’s portfolio more often than not.”
The firm’s investors are split across retail and institutional with retail dominating at 75 per cent. The firm recently won the renewable energy mandate for the government’s Nest pension scheme which demonstrates the firm’s spread across retail and institutional investment.
Skelding thinks that the firm won these awards because financial advisers have been on a journey with the firm over the last few years, particularly in the tax efficient space, where it is the largest provider of product.
“We may have the largest market share, but we don’t rest on our laurels,” he says. “We continue to innovate with new VCTs and a knowledge intensive EIS vehicle to back those exciting early stage businesses with technology and research and development at the core of what they do.”
Skelding observes that there is a two-pronged benefit from the firm’s vehicles. “You are investing in early stage, unquoted start-up companies with some generous tax relief to compensate for those risks.”
Current market conditions haven’t affected the firm as Skelding says that they don’t invest short term or tactically but in specific mandates defined across the various solutions.
“We invest from seed stage and all the way to an IPO and, despite the pandemic, entrepreneurs tend to find a way and pivot and show their skill set and abilities when things are tough.”
EIS portfolio companies are typically held for five to 10 years. Looking forward, Skelding observes that there is an increasing trend of private clients investing in private market opportunities, such as private equity or debt. “It’s been largely the domain of the institutional world,” Skelding says, “but we are seeing lots more interest from private clients at being able to access these opportunities, and a number of institutions which are structure products to allow access.
“There are lots of great opportunities and deal flow and pipeline so we are working with a number of firms to see how we can package that for retail clients, and I expect to see private clients holding private markets in their SIPPs and ISAs in years to come.”