AIM Industry Report 2017/18

82 83 ABOUT TIME INVESTMENTS TIME is an award winning provider of tax efficient investment solutions and long income investment funds, with our original Inheritance Tax (IHT) service boasting a 20+ year track record of successfully achieving IHT savings for our investors. Our service was one of the first to use Business Relief (BR) to offer IHT mitigation for investors and holds the longest track record in our market. To date, we have helped over 3,000 investors tackle their IHT liabilities and a 100% track record of successfully achieving BR. We have over £750 million in assets under management with 60 staff and growing. We pride ourselves on offering real transparency around our products, what we invest in and what the risks are. Above all we always keep our clients at the forefront of our mind and their best interests at heart. We’re dedicated to supporting the adviser market, which is why we don’t accept direct investments. Recent awards: Winner of Best IHT Portfolio Service at the 2017/18 Investment Week Tax Efficiency Awards, Winner of Best BR Investment Manager at the Growth Investor Awards 2015 and Runner-up in the same category in 2017 and 2016. TIME:AIM was noted as One To Watch for Best AIM Manager at the 2017 awards. Commended for Best Tax and Estate Planning Solutions Provider and Innovation Award for TIME:AIM at the Moneyfacts Awards 2017 and 2016. TIME:AIM – THE ‘SMART PASSIVE’ BR SERVICE TIME:AIM is the first smart passive approach to focus on BR when selecting companies quoted on AIM for inclusion within the investment portfolios created for investors. Available within an ISA and non- ISA wrapper, the service employs a series of rigorous filters, based on various financial, commercial and performance criteria, to select a portfolio of companies quoted on AIM. Designed to offer lower volatility returns than the AIM market, the service only targets AIM-quoted companies that qualify for BR, creating a robust portfolio that will allow investors the opportunity for significant growth potential and mitigation of their Inheritance Tax liability after only two years. The TIME investment team conducts a regular, quantitative screening process on the constituents of AIM. Our process excludes companies which are either unprofitable or trade on overly high valuation multiples. To reduce the volatility usually associated with the AIM market, our screening process also excludes companies which operate in traditionally high-risk sectors, such as the exploration of natural resources. All companies in the portfolio are regularly monitored by the TIME investment team to ensure that BR continues to be available. In the event that a company ceases to qualify for BR or intends to de-list from AIM, we will arrange for the shares to be sold as soon as is practicable and reinvested in BR qualifying shares of a different AIM company. Unlike most AIM BR services, TIME:AIM uses verifiable financial and commercial information published by AIM companies to determine the portfolio of shares for an investor, rather than relying on an individual stock picker’s opinions regarding the future commercial success of companies and the quality of their management teams. It’s our view that the smart passive approach provides a robust investment strategy which is less exposed to human risk factors, such as the departure of a fund manager or stock picker bias. A welcome secondary benefit of this approach is that we are able to offer this service with a significantly lower annual management fee to many of the traditional AIM BR fund managers. TIME INVESTMENTS TIME: AIM THE SMART PASSIVE PROCESS BR QUALIFYING? EXAMPLE FILTERS AIM MARKET SUFFICIENTLY LARGE? RISK? VOLATILITY? AROUND 30 HOLDINGS KEY TAKE AWAYS There are concerns about the potential for concentration risk This is linked to what some see as stretched valuations for a small sub- sector of stocks that are particularly popular with AIM IHT service managers. It’s not particularly surprising that some of the larger, more boring, stable firms attract the attention of these managers, given the objective of their investment offerings. And since they typically diversify across around 30 stocks in all, the wholesale duplication of shareholdings from one to another is likely to be less of an issue, depending on weightings. But advisers would still do well to get a good understanding of the investee companies favoured by the managers they are using. 6 While the vast majority of tax- efficient products in the AIM market are those designed to achieve BR to mitigate IHT, there has been a relative surge in the number of AIM focused VCTs This may have been a reflection of the overall tax-efficient market which saw a big boom in VCT products, driven in part by drops in annual and lifetime pension caps and higher earners looking for routes to tax-efficient income. It remains to be seen if the effects of the 2017 Autumn budget, pushing up the risk profile of VCT eligible investments, make the combination of AIM’s reputation as a riskier index and VCT less appealing for investors. But, having said that, the availability of innovative and tech companies at the lower end of market cap scale, for which some due diligence and corporate governance has already been undertaken as part of the AIM joining process, could make AIM a more interesting hunting ground for those seeking to take advantage of the higher levels of VCT and EIS funding now allowed in the knowledge-intensive sector. 7 As a market of around 1,000 companies, liquidity can certainly be found on AIM and there has been no lack of it in the past year LSE figures tell us that AIM-quoted Abcam, with a market cap of £2,011.60 million, for example, a company which has featured in BR portfolios, traded 9,482,325 shares with a value of almost £95 million in November 2017 alone. Further down the AIM market cap scale, CVS (market cap of £645.55 million) saw 6,896,092 shares traded in November 2017 at a value of just under £90 million. Obviously, though, as with specific AIM stock-picking, sector choice is important as trading can vary significantly. But, the same drivers that impact the FTSE main markets can also be seen within AIM, so AIM is by no means a wilderness of completely random cause and effect. Nevertheless, the number of companies and their market caps generally make trading volumes and the number of trades comparatively fewer than can be found on the main markets, with a snapshot of the FTSE 100 and AIM 100 in December 2017 showing more than 3 times the trading activity on the FTSE 100. 4 AIM has certainly seen remarkably low levels of volatility (along with main markets) over the last year The reality could be that low volatility actually reflects a high level of disagreement between market participants as a result of uncertainty, leading to a healthy mix of bears and bulls who both buy and sell, making for relatively stable price action 72 . Given a Brexit situation where, by their own admissions, commentators simply don’t know for sure what will happen, this is feasible, although it suggests that high volatility post-Brexit could be a sign of a binary outcome (which may be unlikely) – a sign of consensus; prices either falling a lot when most investors want to sell or rising a lot when most want to buy. 5 There is still significant caution among advisers when it comes to AIM investing Given the type of the companies that are typically quoted on AIM, this is reasonable, even with the out-performance exhibited by the market over the last couple of years. But, it is clear that there can be a place for AIM investments within a retail investor’s portfolio under the right circumstances. 1 MiFID II will have some wide- ranging impacts and one of them will be that research can not be provided for free as a part of other services This is intended to ensure that it is not used as a covert incentive for investment, but the result could be that investing on AIM becomes more expensive for both managers and investors and research on AIM companies, particularly at the smaller end of the market, may become even more difficult to come by. This could limit the investments that are considered by advisers and investors, where real opportunities may lie. But, those with the expertise to identify these opportunities could reap the benefits. 2 AIM is strong and well- established as a market We’ve spoken to advisers and providers who have been involved in the AIM market for more than a decade and, while there has been a drop in the number of firms quoted on AIM, when it comes to growth markets, it is and will continue to be the most important. Other competitors have come and gone but, that said, the existence of a similar market that would give potential investors access to more companies of the kind found on AIM is seen by advisers in particular as a good thing. In the meantime, AIM isn’t going anywhere. 3 REPORT CONCLUSIONS