The Alternative Investment Market (AIM) is a sub-market of the London Stock Exchange (LSE), allowing smaller companies to raise equity finance by issuing publicly traded shares.

Research carried out by Intelligent Partnership has found 71% of advisers recommend investment on AIM to their clients and 66% of advisers see their use of AIM investments either increasing or staying the same over the next two years. Here are five key reasons why advisers should start using AIM:

1. AIM is one of the most successful stock exchanges in the world

AIM was launched on 19 June 1995 and over the last two decades the market has grown significantly and has established itself as a leading platform for small companies that are seeking public equity finance. Started with 10 companies and a total market value of $82 million in 1995, the market has so far helped 3,654 companies raising more than £96 billion in equity capital. In addition to raising equity finance for new companies, AIM is also a great platform for growing companies to generate additional funds. In fact, companies already admitted to the market have raised more than half of all funds raised on AIM to date. This shows both the stability and sustainability of AIM in providing financial support to small companies.

2. Headline performance is not the full story

The FTSE AIM Index performance has often been driven by volatile companies (such as junior miners and resource companies), and IPOs attached to investment fads. In addition, some of AIM’s best performers go on to list on the main market, removing their positive contribution to the index return.

For stock pickers who can identify them, there are some great opportunities on AIM that can fulfil a number of different investment objectives.

3. A significant proportion of AIM shares qualify for tax reliefs offered by EIS, VCTs and Business Property Relief (BPR)

Although AIM is a secondary market where only “listed” companies can trade their shares, AIM shares are not treated as being listed on a recognised stock exchange by HMRC. This makes a large proportion of AIM shares eligible to hold in a tax efficient investment wrapper to allow an investor to receive reliefs on Inheritance Tax (IHT), Capital Gains Tax (CGT) and Income Tax via BPR. It is estimated that between 50-75% of firms listed on AIM would qualify for BPR.

4. Eligible for ISAs

AIM shares have been eligible for inclusion within ISAs since 2013 and therefore investors can get exposure to the AIM market with tax free growth and income. In addition, the rule has triggered a number of companies moving from the main market to AIM, offering investors more secure investment options, while taking the tax benefits of ISA.

5. AIM vs unquoted companies

The big advantages of investing on AIM are the additional levels of scrutiny and liquidity. Although one of the attractions of AIM is that there is less regulation than there is on the main market, firms listing on AIM still have to meet very high standards of governance.

Prior to IPO, firms have to go through a very detailed process preparing a minimum of three years of audited accounts, legal documentation and business plans for scrutiny by a variety of professionals including accountants, lawyers, analysts, brokers and institutional investors.