BR Report 2019

26 27 FTSE AIM 100: PERFORMANCE, 19 MARCH 2019 AVERAGE DAILY VALUE OF SHARES TRADED ON AIM SOURCE: HARGREAVES LANSDOWN FTSE AIM 100: PERFORMANCE, 19 MARCH 2019 SOURCE: LONDON STOCK EXCHANGE Liquidity Unless portfolios are very large it should be possible to liquidate a well-diversified AIM portfolio very quickly, perhaps within a week, assuming normal market conditions. But, in crisis conditions, AIM can be vulnerable to investors reining in their risk appetite and selling off perceived smaller/riskier companies. Once that sell off happens liquidity can dry up 13 . Yet AIM trading has remained relatively strong; the average daily value of shares traded per company quoted on AIM dipped in December 2018 to £208.6 million. But, to put this in context, the daily average in 2016 was just £129.3 million 14 . Considerations for investment / AIM GBP 5,000 4,000 Mar 2016 Sep 2017 Jun 2018 Mar 2019 Dec 350 150 300 100 250 50 200 £ million 0 Jan 17 Jan 18 May 17 May 18 Sep 17 Sep 18 Feb 17 Feb 18 Jun 17 Jun 18 Oct 17 Oct 18 Mar 17 Mar 18 Jul 17 Jul 18 Nov 17 Nov 18 Apr 17 Apr 18 Aug 17 Aug 18 Dec 17 Dec 18 Jan 19 Feb 19 COMMON BENCHMARKS FOR Q4 2018 PERFORMANCE AIM Index -21.8% Numis Alternative Markets Index -20.4% Providers’ performance Contrary to popular belief, AIM focused BR managers do have differing strategies, selection criteria and underlying investees. While there is some overlap of target shares, plenty of managers look beyond the top 30 or 50 and the average market capitalisation. So, it’s interesting to note that when we looked at the Q4 2018 performance or a random selection of AIM BR managers, we found a range of results. While still negative, the best outperformed the benchmarks by 10%+. At the other end of the range, another reported a 25% loss. While like-for-like comparisons are not easy, and there may be some popular companies among BR managers, varying weightings of sectors within portfolios and timings of acquisitions and disposals certainly impact returns. Another key takeaway is that, overall, longer term returns look very attractive. One of the BR offerings we looked at shows returns of almost 400% since its inception in 2002. So, it’s not surprising that managers have expressed positivity about the outlook over the longer term: “Allied to the 40% relief from IHT available on qualifying assets, we continue to believe that a well diversified portfolio of businesses that are able to grow earnings over the medium to longer term whilst withstanding shorter term turbulence is an attractive proposition for suitable investors.” Investec Wealth and Investment AIM Portfolio IHT Plan, Q2 2018 Factsheet. “We believe the BR market is entering a mature phase - the gold rush is over and some serious mining is now required.” — LAURENCE CALLCUT, HEAD OF SALES, DOWNING Considerations for investment / AIM