Originally written by Lawrence Gosling on Small Business
Many investors and professional advisers are tempted to put all their Seed EIS investments with a single investment manager who they believe has a good track record, but by doing so they are potentially increasing their risk — it’s important to have a diversified portfolio when seed investing .
Many investment managers are investing at Seed EIS and with the follow-on EIS investments in the broad technology sector, partly because technology is a large sector which has accelerated in popularity since on the onset of the pandemic.
Two Seed EIS investment managers, Nova and Worth Capital, argue that diversification is essential because just as investor would not put all of their investments into a single company listed on the public markets or a single main stream investment fund, so putting it with a single SEIS manager is not advisable.
Andy Davidson, one of the partners at Nova based in Liverpool, says academic research consistently shows diversification is achieved with a portfolio of around 30 companies, whereas most Seed EIS funds have between 5 and 10 portfolio investments. Simple maths suggests an investor should spread their Seed EIS investments between three to five fund managers.
Matthew Cushen, one of