That’s the view of Stephen Hazell-Smith, chairman of Phoenix VCT, which invests in AIM-quoted companies, and chairman of PLUS Markets Group.

Hazell-Smith believes this could create difficulties for the trusts, which must invest at least 70 per cent of their funds within three years of launch to secure attractive tax breaks. He says: ‘The challenge for larger VCTs is to invest the bulk of their funds within the three-year deadline. It’s going to be an interesting period ahead – although if you’ve got a great venture, you’re in an excellent position.’

Other VCT managers agree that it is becoming harder to sort the wheat from the chaff, especially for those with more to invest. Peter Walls, managing dirctor of Unicorn Asset Management, comments: ‘When the market is going up and the economy is going well, it’s always the case that you get lesser quality at higher pricing. But we are not worried as our VCTs [Unicorn AIM VCT 1 & 2] are not there to back everything and we choose carefully.’

According to recent research from Business XL, VCTs have over £1.1 billion on their balance sheets waiting for the right investment proposition.