Intelligent Partnership is currently hosting a set of investment roadshows focused on AIM investment providers. The events have been targeted at the financial adviser community, allowing intermediaries to compare five leading AIM managers in one morning. The forum also gives advisers an opportunity to ask the managers any burning questions they might have.

The showcases include presentations from Blackfinch, Close Brothers, Guinness, Puma, and TIME Investments.

All of the managers displayed the IHT benefits of their AIM portfolios, via qualification for Business Relief (BR).

No shying away from volatility

All five investment managers showcasing their products recognised that AIM is a volatile market, and that investors should be aware of this.

Where the managers agreed was that many of the top 25 companies on AIM were highly valued. Some companies on AIM have a market cap way in excess of £1bn. However, none of the investment managers on show were investing in the likes of ASOS or Fever Tree, despite their rapid growth.

Dave Hughes, senior business development manager at TIME Investments, suggested that AIM IHT portfolios are “not suitable for people in their 80s”. He said that investors need to be able to ride the peaks and troughs of AIM, and that this wouldn’t be a suitable route if the investor was of a certain age.

Hughes also suggested that investors should diversify by investing in unlisted BR portfolios and AIM IHT portfolios simultaneously.  

An active approach

Active management has certainly come under fire of late, with sceptics suggesting that better returns can be generated from index funds and ETFs. However, when looking at AIM the active approach does have its advantages, namely in reducing the volatility that is present in this growth market.

The way the managers under the spotlight invest in AIM quoted companies differed somewhat.

Tom Santa-Olalla, investment specialist at Close Brothers, said that his firm has regular meetings with all of the companies they are invested in. He said:

“Although CEOs will always say that their company is doing great, meeting them on a frequent basis allows us to see if there’s been any change in strategy.”

Blackfinch Investments takes a slightly different approach by partnering with Chelverton Asset Management for the stock selection process. Sarah Wakefield, business development manager at Blackfinch, said:

“Chelverton was selected for their expertise in managing smaller market cap companies. However, Blackfinch carefully monitor the investments, and will challenge Chelverton on decisions where necessary.”

TIME, in contrast to the other managers, adopts a smart passive approach which uses an algorithm to select AIM investments for its portfolio. Hughes said the benefit is that fees are reduced for investors.

Overlapping investments

Research suggests that approximately a third of all money invested in AIM is via IHT planning services.

Most AIM IHT managers are looking for companies that have low P/E ratios, which is why they tend to avoid the AIM companies with high market caps and newer entrants. However, this approach can lead to duplication of the underlying investments.

Wakefield from Blackfinch said that advisers should beware as “most providers are buying the same 20-30 AIM quoted stocks”.

However, Santa-Olalla from Close Brothers said that this is unlikely to present an issue, as AIM IHT providers have a long-term view on their investments so that investors can receive IHT mitigation benefits.

Will the OTS target AIM?

Philip Hammond called for a review of IHT via the Office for Tax Simplification (OTS) in January. Since then there have been mutterings over whether BR will be targeted, and therefore AIM’s qualification for IHT relief.

Shane Weston, senior business development manager at Puma, said that the OTS review would “focus on simplification” as opposed to the removal of BR.

Debbie Mahanta, business development at Guinness Asset Management, added:

“BR is extremely unlikely to be revoked. However, there is a small possibility that there could be changes to the minimum holding period from two years to three, five or even seven years. If the holding period is extended to seven years, then BR will become far less attractive as people with an IHT issue would be able to use a PET (Potentially Exempt Transfer) instead.”

Santa-Olalla, Close Brothers, said:

“BR is a really important part of UK PLC. These small to medium cap companies are the lifeblood of the UK. It would be very short-termist for a government to remove this. The compound effect of keeping these businesses healthy and functioning is massive, through all the income tax they pay, national insurance, and VAT on the products they produce.

“We’re confident that BR is still going to be there. It’s been supported by both the Conservatives and Labour in successive governments.”

EIS integration

Approximately 30% of AIM quoted companies qualify for EIS (Enterprise Investment Scheme) tax relief. However, there are currently only two open AIM IHT offers in the market which target EIS qualifying investments.

Mahanta, Guinness, showcased how her firm integrates EIS into its AIM offering to allow investors access to 30% income tax relief, as well as CGT deferral after three years of holding the investment. This product is a higher risk option, and Mahanta said that most investors would transfer to their lower risk “Best of AIM” product after the three year qualifying period.

The other AIM providers at both events said they were unlikely to employ a greater focus on EIS within their AIM products in the short term.

Meet the managers

So that you can meet leading investment managers in this space, Intelligent Partnership is hosting a collection of AIM Showcases across the UK.

We still have very limited places available for our remaining events in Newmarket and Southampton. You can book your free place here.

There will be five of the largest AIM investment managers in the market showcasing their propositions, with a unique opportunity to network with investment providers face to face.

Our AIM Showcases give you a great opportunity to hear investment providers talk about their solutions, while comparing key investment information such as charges and levels of risk and return.