AIM Industry Report 2017/18

6 7 OPENING STATEMENT A WORD FROM MARCUS STUTTARD Even in the face of macroeconomic uncertainty, we have seen strong levels of capital raising on AIM in 2017 and a surge in AIM IPO activity. In Q3 2017, the London Stock Exchange surpassed all global exchange groups for IPO capital raised. And 22 years on, AIM continues to be a global success story for Britain, becoming without comparison the world’s leading growth market. Up to the middle of December 2017, 44 AIM IPOs had raised almost £2 billion and close to 70% of these stocks were trading up. This is already double the money raised and more than a 10% increase on the number of IPOs compared to 2016. Not only is this another vote of investor confidence in our fast-growing businesses but a significant boost for UK PLC. These companies are central to innovation, job creation and economic growth. Success stories this year include UK household names such as trucking business Eddie Stobart and sportswear retailer Footasylum. They’ve joined international cutting- edge biotech and tech businesses such as Paris-based Novacyt and San Francisco-based Boku in raising high- quality, long-term equity capital in London. AIM not only channels capital to new IPOs but also to existing businesses. Over £5 billion has been raised in follow-on fundraising by existing issuers up to the middle of December 2017, up 27% compared to 2016. 2017 has also been another strong year for AIM in terms of performance. In the first half of the year, UK Mid and Small Caps outperformed the broader UK and international markets. The FTSE AIM All-Share and FTSE AIM 100 increased by 21% and 25% respectively, compared to 8% for the FTSE 100 and S&P 500. What’s more, the market is continuing to mature. AIM IPOs during 2017 have had an average market capitalisation of over £90 million, a stark difference compared to a decade ago when the average value of new companies joining AIM was £17 million. To underpin AIM’s future development, this year we formally invited feedback from the AIM community through the publication of the AIM Discussion Paper. We have been delighted by the level and quality of the discussion and feedback that it has generated, highlighting the confidence and support that market users have for AIM’s structure and framework. Together with the UK Government, the London Stock Exchange is committed to facilitating access to patient or long-term capital for innovative businesses across all stages of their development. We are working with capital providers across the equity funding ladder, from angel finance to venture capital and crowdfunding. We look forward to 2018 with confidence and enthusiasm. The AIM pipeline continues to be robust and our mission remains constant: to support a diverse set of companies and investors to ensure the next generation of entrepreneurs have access to the patient capital they need to scale their businesses and prosper. This report has been written with advisers in mind. We want to provide our readers with a balanced and informative review of AIM, so the report will cover negatives as well as positives and therefore it is NOT sales or marketing literature. The report comprises an update on the AIM market today, insights into its development, items to take into account when advising on investing in AIM, an analysis of the funds and investment opportunities that are available in the market, and surveys and interviews with IFAs and providers to establish their feelings about AIM. Our work is CPD accredited and by the end of the report readers will feel informed about AIM and have the knowledge they need to decide if they want to include investments in AIM as part of their proposition. We don’t expect readers to pick it up and read it from cover to cover (although we’d love it if you did). Instead we expect that most people will dip in and out of the report, picking out sections of interest and using it as a resource over the next 12 months whenever they are considering AIM. The first half of the report is devoted to an update on AIM, looking at the market itself and how it has performed. We then look at some of the tax benefits available investing on AIM, before finishing off with sections based on market research of advisers, and an analysis of AIM-based investment funds open to retail investors. There is a focus throughout on tax advantaged funds as we think these are of most interest for advisers and they are where our experience lies. Of course, conventional funds and OEICs get plenty of coverage elsewhere. ACKNOWLEDGEMENTS AND THANKS We couldn’t do this without the help and support of a number of third parties who have contributed to writing this report. Their contributions range from inputting into the scope, sharing data, giving us their insights into the market, providing copy and peer reviewing drafts. Some of them have inputted directly and some of them were good enough to share their thoughts and ideas over coffee or at various conferences and events. So, a big thanks to: Sam Barton, Stephen Daniels, Jon Gould, Andrew Martin Smith, Sharon Priest, Matt Strachan, Justin Waine, Mohsin Bukhari, Neal Foundly, Christopher Green, Michael Seagrove, Malcolm Snook and Marcus Stuttard. Their input is invaluable, but needless to say any errors or omissions are down to us. We have relied upon MICAP for most of the data that we have based the report upon. MICAP is part of the same group of companies as Intelligent Partnership. We also carried out our own extensive desktop research by examining brochures, investment prospectuses, mystery shopping providers and crawling through the websites to verify their data. The report is made possible by our sponsors, who have contributed copy to the report on pages 71 to 82 and supported us by helping to meet production and printing costs. So, a big thanks to Blackfinch Investments, Close Brothers, Guinness Asset Management, Psigma Investment Management, Puma Investments, Thorntons Investments and TIME Investments. REPORT OVERVIEW HOW TO USE THIS DOCUMENT MARCUS STUTTARD Chief Executive, Alternative Investment Market We are required to state these in order to qualify as accredited for structured CPD. By the end of the report, readers will be able to: Understand the effects of major recent national and international events such as the Brexit vote and 2017 general election on the AIM market. Identify the main developments and news in the AIM market in 2017. Compare the key metrics of AIM-based tax efficient offers with knowledge of the average statistics including the mean and mode fees and charges currently applied. Recognise how the adviser community is currently interacting with AIM and its areas of confidence and concern. Describe the pros and cons of AIM-quoted companies vs. unquoted companies from an investment perspective. LEARNING OBJECTIVES