AIM Industry Report 2017/18

64 65 “Small and mid-cap investors are telling us that AIM is in the best position it has ever been. Yes, it has its faults but this is far outweighed by the benefits that accrue to companies and investors.” — DIANE GWILLIAM, RSM HEAD OF CAPITAL MARKETS MARKET COMPOSITION BY PRODUCT TYPE Clearly, BR is the biggest segment among AIM-based tax efficient offers. This is not surprising as the AIMmarket is not labelled as a “recognised” stock exchange for BR purposes, so as long as an AIM-quoted company meets the BR qualifying rules it would be eligible for the relief after the minimum holding period. In addition, the introduction of AIM shares, eligibility to be held within ISAs in 2013 has also stimulated the market’s growth – there has been a significant increase in the number of new, ISA eligible AIM BR offers launched in the market in recent years. MARKET COMPOSITION BY STRATEGY From the charts we can see that there are only two investment strategies available to AIM investors – Growth and Growth & Income. Historically, the proportion of Growth offers was higher, but, in 2016/17, the tables have turned, with the Growth & Income offers taking the lead. This is because the 2016/17 tax year saw a greater proportion of AIM-based VCTs in the market and all the VCT offers have the Growth & Income strategy. Although the number of Growth & Income offers increased in 2016/17, the previous section revealed that only a very small proportion (6%) of advisers use AIM investments to generate income. NEW OFFERS (2016/17) HISTORICAL OFFERS MARKET COMPOSITION BY PRODUCT TYPE EIS BR VCT 64% 26% 10% 59% 8% 33% MARKET COMPOSITION BY STRATEGY NEW OFFERS (2016/17) HISTORICAL OFFERS GROWTH GROWTH & INCOME 42% 58% 44% 56% CUMULATIVE NUMBER OF AIM OFFERS OVER TIME 2000 2006 2012 2001 2007 2013 2002 2008 2014 2003 2009 2015 2004 2010 2016 2005 2011 2017 20 10 0 30 40 50 60 MARKET COMPOSITION BY INVESTMENT TYPE Alternative investment fund and discretionary portfolio service are the two investment types available to investors who are interested in AIM-based tax-efficient opportunities. About two in three products launched before the 2016/17 tax year were discretionary portfolio services. But, in that year, the alternative investment fund structure was more popular than has historically been the case. Perhaps the regulatory pressure from MiFID II is one of the reasons that contributed to the increasing number of alternative investment funds as providers of such funds don’t need to carry out a suitability assessment on their clients. In addition, it is also due to the high percentage of AIM VCTs in 2016/17 as most VCTs have an alternative investment fund structure. FEES AND CHARGES Here we take a detailed look at fees and charges of AIM-based tax efficient products. Some of the fees are applied to both investors and investee companies. Our analysis focuses on the total and we will specify when we specifically refer to an investor or investee company fee. Overview From the two tables we can see that Annual Management Charge (AMC) is the most common type of fee quoted by AIM managers – stated by 92% of both historical and 2016/17 offers. Initial Charge was ranked second and was quoted by about 67% of managers in 2016/17. The proportion of offers that quote an annual performance fee increased from 15% to 25% in the 2016/17 tax year, while some other charges, for MARKET COMPOSITION BY INVESTMENT TYPE FEES AND CHARGES NEW OFFERS (2016/17) HISTORICAL OFFERS ALTERNATIVE INVESTMENT FUND DISCRETIONARY PORTFOLIO SERVICE 33% 42% 58% 67% HISTORICAL OFFERS CHARGED BY PERCENTAGE TOTAL INITIAL CHARGE 20 51% TOTAL INITIAL DEAL FEE 8 21% TOTAL AMC 36 92% ANNUAL PERFORMANCE FEE 6 15% ANNUAL PERFORMANCE HURDLE 6 15% EXIT PERFORMANCE FEE 3 8% EXIT PERFORMANCE HURDLE 3 8% EXIT DEAL FEE 9 23% TOTAL ANNUAL ADMIN FEE 2 5% 2016/17 OFFERS NEW FURTHER TOTAL INITIAL CHARGE 8 67% TOTAL INITIAL DEAL FEE 3 25% TOTAL AMC 11 92% ANNUAL PERFORMANCE FEE 3 25% ANNUAL PERFORMANCE HURDLE 3 25% EXIT PERFORMANCE FEE 1 8% EXIT PERFORMANCE HURDLE 1 8% EXIT DEAL FEE 2 17% TOTAL ANNUAL ADMIN FEE 0 0% “Many experts believe there is an incremental shift from quantity to quality on the AIM market.” — SHARESMAGAZINE.CO.UK