Figures from Morningstar, as reported by FT Adviser,
On the face of it, these figures do not appear to be a ringing endorsement of alternative investments, or even the Alternative Investment Market (AIM).
However, when put into a wider context, there may be some reasons to be a bit more optimistic about the alternative investment world, and AIM in particular.
Everyone knows that the final quarter of 2018 was a tough one. Volatility on AIM saw it lose more than 20% of its market value over the period. But it was far from the only index to suffer pain, with global issues having a dramatic effect on investment across the world.A range of factors created a culture of uncertainty across global markets in the final months of 2018, driven by concerns of an escalating US-China trade war and the potential for a global economic downturn. No surprise, then, that alternative investments, generally seen as riskier, should see some serious volatility.
However, experts believe that there were even more specific factors that threatened the AIM market, such as the Office of Tax Simplification’s (OTS) inheritance tax review, with suggestions it could have an impact on the future of Business Relief – an important factor in many AIM investments. Similarly, rumours that Chancellor Philip Hammond would introduce changes to the tax regime impacting AIM investments also caused concern – although this did not materialise.
The good news is that AIM has been showing signs of recovery ever since. It has climbed steadily since the start of 2019 in a way that should offer encouragement to investors. By May 2019, AIM’s market value had climbed to £104 billion – its highest figure since 2017 and second highest since the market was launched in 1995.
Indeed, given the factors that appeared to be arrayed against AIM in the final quarter of 2018, experts have suggested that the market proved remarkably resilient. As BDO put it in its January AIM Insights market update: “[AIM] has not performed as badly as the cocktail of risks it faced might have suggested.”
The next edition of our Alternative Investment Market Industry Report, to be published in September, will explore these trends and changing market influences in detail, including looking at what the London Stock Exchange has been doing to underpin AIM’s reputation and boost confidence in the market, with input from experts including BDO.
And to get a further understanding of what is going on in the AIM market, we are hosting six Showcase events around the country in September focusing on the market. To find out more about these, click here.