AIM Industry Report 2017/18

46 47 HOW HAVE THE LAST 12 MONTHS BEEN FOR YOUR BUSINESS, WHAT CHALLENGES HAVE YOU BEEN RESPONDING TO AND WHAT CHANGES HAVE YOU MADE TO YOUR BUSINESS? SD: It’s been an interesting 12 months for us, because 12 months from 21 November 2017 was when we launched our AIM IHT service, so we were delighted to be named as ‘One to Watch’ in the Best AIM Investment Manager category of the 2017 Growth Investor Awards. The main challenge for us has obviously been getting knowledge of the service out into the adviser community, especially that we’re doing something slightly different, as we are not running an active stock selection process in the traditional sense. We’re running a smart passive service, so our stock selections are down to whatever our quantitative- based market screening process produces as the model portfolio. Certainly, in our experience over the last 12 months, we’ve been able to find companies that demonstrate all the characteristics we’d like to see, it’s just whether going forward there is enough available stock in those firms to meet demand because if the shares are held by BR managers like us, they generally have a long-term buy and hold strategy so are not being freely traded as funds, hedge funds and speculators would do perhaps on the main market. And with the returns being relatively strong in the last 12 months, there seems to be an increasing level of interest in putting clients into this particular type of service. We are countering this demand issue by moving from a 25-stock to a 30-stock portfolio; We equally weight each company within the portfolio, so that means, rather than having to buy 4% in each company, we’re buying 3.3%. If our inflows get better, the amount we need to deal in each stock is therefore going up, but by diversifying the holding more, it reduces proportionally the amount you need to buy from each company. And, because of the process we’re running, there is no margin or cost differential for a client having a 25-stock portfolio with us than a 30-stock portfolio; we’re not meeting management teams, we’re not trying to pick company A over company B. So, it’s gone very well so far and we’re undertaking our portfolio rebalancing process right now. SP: Blackfinch has had a phenomenal year for growth with more advisers engaging with Blackfinch across its range of tax efficient solutions. New business inflows so far for 2017 have increased 143% over 2016 figures. Our challenges have been ensuring that our Evolve EIS Portfolios fulfil the growth and development guidelines. Our Adapt AIM Portfolios continue to improve returns and offer real diversity in comparison to our peer group, whilst ensuring that there is increased access for these portfolios through adviser platforms. Blackfinch is proud to have won the M&A ‘Asset Servicing Company of the Year and for also being a finalist for ‘Best IHT Portfolio Service 2017/18’ at the Tax Efficiency Awards. MS: Business has been very healthy for us too. Our key development has been to launch our AIM service on platform. We have been actively managing AIM portfolios since 2006, and early in 2017 launched our AIM portfolio as a platform model. We spent a lot of time making sure the platform could accommodate our strategy and not the other way And what I’d like to see is the investment industry really trying to get the message across that you don’t just have to buy ISAs, unit trusts or bonds. There are other wrappers. I think there is an appetite within the investor market for better investments that do look genuinely at things that haven’t been available through the traditional wrappers that the investments and insurance industry have used. I do come across a lot of clients that really have knowledge, they’ve got information, they’ve got ideas and I think the AIM market could help satisfy some of that. And I think we need, as a whole industry, to put in front of people far more that these other things exist, as I say, with the limitations it has in terms of maximum exposure and so on and making sure the clients fully understand the risk associated. Clients are willing to adjust some of their risk thoughts in order to get hold of investments that satisfy their tax and investment requirements. MSn: I think that greater acceptance that some companies on AIM have a lower risk profile than the general perception that all must be high risk would be good. And regarding the products that are available, I think, as with everything else in the market there’s a big squeeze on fees for all of us, so a reduction in the fees within the products would be good to see. Then, like Chris, I’d like to see more providers and more products available, because I always think greater competition improves the chances of diversification and it just gives us a better opportunity to find something that is right for each particular client. It could also help reduce fees. But beyond that, AIM also encourages small businesses to grow and develop the economy and provide a good footing going forward for generations to come. NF: I don’t see any issue with it as a market. As I said at the beginning, it’s developing in the right way in terms of being a market for all companies, if you like. It’s operated by the London Stock Exchange, and they may be able to do something at a market level to encourage greater coverage to the investment banks and independent research boutiques. But no, I don’t see that as a market, they need to do much more. To be honest, I don’t think any tightening of the regulations is necessary. We tend to want to encourage more and a greater variety of companies to be able to choose from. They widen our universe from which to pick stocks, really and it’s on us, really, to pluck out and eliminate the bad ones, and try to pick the good ones. Clearly there’s always going to be some rotten apples in there, but that’s what good investing is about – avoiding those. So, we’re very pro- selection, wider choice and a greater number of constituents of AIM would suit us very well. MB: I think tightening the regulations is a good idea. Some sort of improved corporate governance code has got to be there. Whether this can be enforced or not, I don’t know, but I’d like to go as far as seeing international CEOs and other senior management sitting British standard corporate governance exams. MS: I think the discussion paper which is being proposed to look at the current AIM Rules and regulation and how they may be tightened up will be useful. For those individuals who have invested directly into the AIM market without advice, or without conducting their own thorough due diligence, which is very difficult, there are probably more horror stories than there are success stories. In terms of the more defensive capital preservation portfolios, I would like to see a portfolio that generates a true dividend yield. INDUSTRY ROUNDTABLE INSIGHTS FROM AIM MANAGERS LISA BEST MIKE SEAGROVE MOHSIN BUKHARI CHRISTOPHER GREEN MALCOLM SNOOK NEAL FOUNDLY ATTENDEES SHARON PRIEST (SP) BLACKFINCH SAM BARTON (SB) CLOSE BROTHERS JON GOULD (JG) PSIGMA ANDREW MARTIN SMITH (AMS) GUINNESS ASSET MANAGEMENT JUSTIN WAINE (JW) PUMA INVESTMENTS MATT STRACHAN (MS) THORNTONS STEPHEN DANIELS (SD) TIME INVESTMENTS MODERATOR: LISA BEST INTELLIGENT PARTNERSHIP “We’re looking really for quality companies which are growing and trading at sensible, or even better, cheap, valuations.” — JUSTIN WAINE, PUMA INVESTMENTS