The Alternative Investment Market (AIM) has been called many things since it was founded in 1995. However, since then the AIM markets has gone on to out-distance all other UK markets large and small by a wide margin.
2020 saw the AIM market dramatically out-distance the rest with a return of 22 per cent where fully listed UK indices all showed declines, especially the FTSE100 largest company list, which was down 12 per cent.
Over five years the gap was even more stark with AIM up 67 per cent against 26 per cent for large-caps.
Performance of indices over 5yrs
Source: FE Analytics
Nurturing world leaders
AIM now boasts three world leaders and more in its top 20: Fevertree Drinks, the world’s leading premium mixer drink producer, Abcam, the world’s leading monoclonal antibody company, and RWS, who are first for high level language translation.
Two out of Europe’s top three online retailers are listed on AIM in the shape of Asos and Boohoo. Europe’s best airline Jet2 according to Tripadvisor is listed on AIM.
Five substantial and profitable online games companies are listed on AIM in the shape of Keywords, Codemasters, Frontier, Team17 and Sumo, making the UK a leading domicile for games developers.
A whole range of AIM listed software and technology companies are putting the UK at the forefront of technological development in Europe.
First Derivatives, for example , are world leaders in ‘big data’, likewise Blue Prism in robotic software and GB Group in ID verification software. All three started as UK orientated businesses and have gone on to develop markets across the world.
Much more could be made of AIM as a venue for attracting and nurturing fast growth companies in the United Kingdom.
The first 20 years was a struggle
It’s not always been this way.
The first 20 years were not covered in glory. AIM seemed to attract opportunists in the latest hot sector, be that TMT, oil & gas, mining, real estate, biotechnology and alternative energy.
The majority of companies were ‘blue sky’, many with no revenues let alone profits or dividends. The light touch rules attracted an assortment of participants not just from the UK but from many other domiciles and perhaps justified the sobriquet ‘Wild West’.
An almost imperceptible transformation
The transformation of AIM happened imperceptibly between five and 10 years ago. This has happened to the extent that AIM is now a broad-based market of 1,116 companies with 24 having market capitalisations of over £1bn starting with ASOS at £5.3bn. Indeed around 35 AIM companies would be big enough to enter the FTSE 250 mid-cap index.
AIM is now also exposed to many industrial sectors with no area of the market dominating the picture. Although there is greater exposure to ‘growth’ and new industries, 83 out of the top 100 AIM stocks are profitable while 53 per cent of them paying dividends.
Although light touch regulation is a feature of AIM, many leading AIM companies aspire to match the premium listing regime often at the encouragement of institutional investors.
Creating jobs and wealth across the UK economy
The AIM market has become important to the UK economy with the accountancy firm Grant Thornton finding that over 900,000 jobs are now directly or indirectly supported by the growth of AIM listed companies. They contribute £67.2bn to the UK economy according to their report published in June last year.
AIM is the envy of the world in terms of its depth and scale. It is suitable for nurturing companies from the very small indeed to in excess of £1bn. It is not like NASDAQ where companies have to be multi-billion in size before they can even think of listing. AIM fits an important niche where risk equity can be hard to find in a way that is flexible to comparatively new businesses.
With normal equity risks
Of course, AIM is not without the risks that come with equity investing. Share liquidity can be a major issue when there are many very small companies.
There are sometimes failures as one might expect from smaller companies with shorter track records, less disclosure and lighter regulation. Failure can happen amongst our very largest companies too.
So I salute the success of AIM at nurturing smaller and really quite big companies, creating jobs, boosting the UK economy, providing capital for the next generation of technology led enterprises and being the envy of many other countries.
All interested parties from the government downwards should be doing their utmost to encourage the growth and development of AIM as a venue for raising capital for growth businesses, creating of wealth and jobs in the UK and beyond. AIM represents a beacon in so many ways for corporate development in the United Kingdom.
Harry Nimmo is co-manager of the ASI UK Smaller Companies fund and co-manager of the Standard Life UK Smaller Companies Trust. The views expressed above are his own and should not be taken an investment advice.