Downing dismisses managers

Downing Classic VCTs 1, 2 and 3 have severed all links with Classic Fund Management Ltd, the company run by ex-Baronsmead boss Richard Hargreaves and Graham Spooner, earlier than expected.

In a missive to shareholders at the end of February, Chris Kay, chairman of the original Downing Classic VCT, said that although Classic had originally been informed back in November 2003 that their investment management contract would be terminated within 12 months, he had decided to bring forward the break-up in order to plan more effectively for the future. Downing will sever all contact with Classic on 30 April.

Julie Baddeley and Robert Drummond, the respective chairmen of Downing 2 and Downing 3, also confirmed that Classic would be relieved of their fund management responsibilities at these VCTs from this earlier date as well.

That the Downing VCTs have made this decision is unsurprising, as Classic’s management of these funds has been less than spectacular.

The first Downing Classic VCT has returned minus 10.5 per cent to shareholders every year since its launch in 1997. Investors who bought shares at 100p back then are sitting on shares with net asset values (NAV) of just 57.9p.

The performance of the Downing Classic 2 fund has been worse – it has returned minus 24.2 per cent every year since 1999 and has an NAV of just 35.8p. Over at Downing Classic 3, its annual return since 2000 has been minus 15.4 per cent and its NAV is a sombre 61.9p.

Investors will apparently be updated on the selection process for the new managers at the VCTs at upcoming AGMs. They will also have to swallow the hard fact that despite its truly woeful investment record (Classic Fund Management Ltd have been responsible for three of the worst ten VCTs ever launched) Classic will receive total compensation payments of almost £236,000 from Downing due to the early contract severances.

(17/03/04)