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Industry Update
QUARTER 1 2021
AIM performance during Covid-19 What the managers say Fees and charge The importance of ESG The UK listing review Life after Covid-19
FIND INSIDE
INTRODUCTION
1
MARKET UPDATE
2
CONSIDERATIONS FOR INVESTMENT
3
INDUSTRY ANALYSIS
4
MANAGERS IN FOCUS
5
WHAT'S ON THE HORIZON
6
FURTHER LEARNING
7
The latest news, updates and statistics on everything AIM
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In partnership with:
1. Introduction
Foreword Opening statement Update overview Key findings
Foreword Opening Statement Update Overview Key Findings
1. INTRODUCTION
AIM Performance Reform suspended 10% Rule Regulatory Update Benefits of an AIM Portfolio AIM waking up to ESG 2020 - Growth Became Value Tax-efficiency and AIM What the Managers Say
2. market update
Fees and Charges Market Structure
3. Considerations For Investment
4. Industry Analysis
Blackfinch Blankstone Close Brothers Puma Sarasin Time AIM Comparison Table
5. managers in focus
Life After Covid-19 Potential Changes to IHT? What the Managers Say
6. what's on the horizon
Learning Objectives CPD and Feedback About Intelligent Partnership
7. further learning
2. MARKET UPDATE
3. CONSIDERATIONS FOR INVESTMENT
4. INDUSTRY ANALYSIS
5. MANAGERS IN FOCUS
6. WHAT'S ON THE HORIZON
7. FURTHER LEARNING
AIM Options increase ESG in Investment The UK listing Review
guy tolhurst
foreword
MENU
Foreword
INTRODUTION / FOREWORD
I
t gives me great pleasure to present to you our first AIM Update of 2021 - released at a time when the UK economy enters a key crossroads in its economic recovery. 2020 will be remembered as the year of Covid-19. Such was its dominance of the news that it even pushed Brexit out of the headlines for most of the year. An initial global market crash was followed by a very selective recovery. Some sectors, such as tech and e-commerce, for example, did extremely well, while others - typically the more traditional sectors such as banking and fossil fuels - struggled to recover. In general the division fell between value and income shares recovering slower, while growth shares rapidly recovered, with many companies reaching historic highs. In this recovery, AIM was one of the big winners. From it’s record low point in March 2020, it reached record highs by the end of the year, outpacing the slower recovery of the FTSE main market. As 2021 has progressed and inflationary pressures have re emerged, the situation has changed somewhat, and AIM’s growth has slowed and in some cases reversed. However it remains well above it’s pre-Covid-19 peak at the time of writing. Looking ahead, the UK’s successful vaccination programme has seen the number of Covid-19 cases dwindle, and at the time of writing, it looks like the Government may be able to look to the post Covid-19 world (famous last words!). Chief among their thoughts will be how to pay for the enormous market stimulus put in place to combat the economic effects of the pandemic last year. As part of his March budget, Chancellor Rishi Sunak laid out his vision: an ‘investment led’ recovery. What this means in practise is a developing subject, however he has already made some key announcements. So far as Business Relief (BR) is concerned, a freeze of various tax bands, including the nil rate band and the residence nil rate band, is likely to increase the appeal of investing into AIM to shield capital from IHT, as inflationary growth gradually sees an increasing portion of estates potentially liable to be taxed. It is likely an increasing amount of this investment will be into ESG focussed ideas. Covid-19 has helped highlight our relative helplessness to environmental change, and the need to take better care of the planet. A combination of consumer demand, government pressure and investor awareness could well help secure further growth in this regard in a long term manner. With the threat of Covid-19 hopefully receding, one final question to ponder is what comes next? Well managed companies in well placed industries may be set for explosive growth at the expense of former competitors who failed during one of the lockdowns, while other totally new industries have sprung up. We think that, for the right clients, AIM can be a great option for gaining exposure to these opportunities with BR, Enterprise Investment Scheme (EIS) and Venture Capital Trust (VCT) qualification offering the bonus of useful tax reliefs.
managing director, intelligent partnership
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INTRODUCTION / FOREWORD
welcome
t gives me great pleasure to welcome you to our first quarterly AIM Update. This is a new format for us, after several successful years publishing Annual Reports. We feel the new format will allow us to continue to provide you with in-depth analysis, insight and data, but now we will be able to do so in a more timely manner. The importance of being able to react to changes rapidly has been ably demonstrated by the AIM market over recent months. Already this year the global equity market has struggled with panic around the Coronavirus Covid-19 pandemic, seeing historic daily falls on more than one occasion. Ironically this pace of change makes the AIM market a good option to consider for longer term investments. Tax advantaged investments like Business Relief (BR), Venture Capital Trusts (VCTs), and even the occasional Enterprise Investment Scheme (EIS), all offer IFAs and their clients effective ways to grow their wealth in the long term. Although the number of companies on the AIM market has shrunk over recent years, there is still plenty of diversity in the market, with an increasing number of larger, well established businesses complementing the younger, more risky (but higher growth potential) options for managers. Indeed, for a savvy manager there are great opportunities in the AIM market and, for an investor, this can be complemented with the generous tax reliefs on offer. As we look ahead, Covid-19 is quite rightly dominating short term forecasts, but other factors will also impact the market. Seamless trade with the EU will continue until at least the end of the year. Britain is looking to strike trade deals with other countries at the same time - most notably the US, which may itself be complicated by the 2020 US presidential elections. I hope this Update, and the Updates to come, will help provide you with the insight and information you need to make informed decisions about advising clients about the AIM market.
Marcus stuttard
opening statement
A word from the head of AIM
INTRODUCTION / OPENING STATEMENT
he past 18 months have been unprecedented, with Covid-19 disrupting every aspect of our lives and presenting profound challenges for governments and economies around the world. Throughout this time LSEG’s (London Stock Exchange Group) AIM has continued to deliver on its core purpose – connecting companies with capital to drive growth, innovation and job creation. During the initial phase of the outbreak in February and March of 2020, flexibility, speed and resilience were the hallmarks of the London markets’ response to extreme levels of volatility and record numbers of trades. On 12 March, less than two weeks before the UK lockdown on 23 March, there were 2.9 million trades on London Stock Exchange - the highest daily figure recorded to date. In the face of these extreme conditions and extraordinary uncertainty about the pandemic, London’s markets remained open. Very quickly, the value of being a public company was brought into sharp focus. Companies on AIM were able to access equity capital rapidly and at scale to enable them to strengthen balance sheets but also to support growth.
- MARCUS STUTTARD
Very quickly, companies on AIM were able to access equity capital rapidly and at scale
By the second week of May 2020, 15 healthcare and medtech companies had raised £190 million in just over two months, some of which were working on potential treatments for Covid-19. Use of funds by these companies included clinical trials, product development and business expansion.
It wasn’t just healthcare and medtech companies that benefited from being on AIM with companies across all sectors able to efficiently access equity capital. Being on AIM enabled these companies to be visible, understandable and known to a wide base of investors who were ready to support them. In 2020, there were 381 follow-on transactions by AIM companies. Together they raised £5.3 billion in follow-on issuances, an increase of 37% compared to 2019. Looking more broadly, AIM continued to drive growth market capital in Europe in 2020. Accounting for 54% of all IPO and follow-on capital raised in Europe, AIM proceeds represented 1.7 times the equity capital raised on the next European Growth Market. While IPOs were subdued in the middle of the year, the pipeline picked up in late summer as confidence grew in the ability to conduct IPO roadshows virtually. 2020 saw 16 IPOs on AIM raising £483 million by companies in sectors including retail, travel, hospitality and payments, amongst others. In 2021 the pace of IPOs has increased with 12 IPOs on AIM through to the middle of May raising £575 million. This has included a number of well-known consumer focused businesses coming to market, including In The Style, MusicMagpie, tinyBuild and Virgin Wines. While at the same time existing AIM companies have raised £2.2 billion in further capital raises over 147 transactions. While the past 18 months have been singularly unique, presenting immense challenges, AIM has continued to do the things that have made it the world’s most successful growth market. Over its nearly 26 years, AIM companies have raised £124 billion; 37% at admission and 63% through further fundraising, highlighting the long-term nature of support provided by investors to companies on the market. AIM provides companies access to deep pools of international capital and offers investors the opportunity to share in the growth, innovation and jobs being created by dynamic companies from the UK and around the world.
head of aim & uk primary markets, london stock exchange
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AIM’s role in growth and recovery
Since launch in 1995, AIM has supported nearly four-thousand growth companies in raising over £115bn, 60% of which has been through follow-on fundraisings. Last year, AIM accounted for 60% of all European growth market IPO and follow-on equity capital raised. While IPOs often get greater attention, it’s worth noting that in 2019 AIM companies raised £3.4bn in 351 follow-on issuances. This underlines the essential function of public markets to enable companies to return to market to raise additional capital, as needed, to continue to grow, innovate, create jobs and support economic development. London Stock Exchange also launched two innovations in 2019, which will support AIM companies and the investor community. In November, we announced a collaboration with Primary Bid to broaden retail investors’ access to IPOs and follow-on equity raisings. Through the collaboration, retail investors will be able to access capital raisings on the same terms as institutional investors. And in October, London Stock Exchange launched the Green Economy Mark, shining a spotlight on listed companies and funds on the Main Market and AIM that derive 50% or more of their revenues from products and services contributing to the global green economy. There are currently 78 companies that have received the Mark, 38 of which are admitted to AIM. In the short-term global stock markets are likely to remain volatile as countries around the world navigate their responses to the pandemic. However, there is much to celebrate about AIM and the dynamic companies it supports. As the world’s leading growth market, AIM plays a key role in supporting UK and international companies, providing access to growth and opportunities for investors and connecting issuers with the capital they need to drive innovation, economic growth and job creation.
s we look to AIM’s 25th anniversary later this year, no one could have predicted the unprecedented circumstances as a result of COVID-19. More than ever, capital markets including AIM have a major role to play in supporting companies that will be needed to provide high quality jobs, find innovative solutions and drive growth to support the economy. Despite market volatility, public companies have continued to be able to access capital to strengthen their balance sheets and liquidity positions. In the first quarter of 2020, London’s public companies across a wide range of sectors, from technology to leisure, raised almost £5 billion in IPO and further capital. If we look back to the 2008 financial crisis as an example, companies were able to access markets efficiently, with new and existing investors willing to take a long-term view and continue to deploy capital. Our expectation is that investors will continue to do that through this crisis However, it will be important for companies to maintain good communication with investors. Firms that build trust through regular and transparent communication with investors are the ones that are better able to go back to their investors and raise further capital if they need to.
update overview
INTRODUCTION / UPDATE OVERVIEW
We couldn’t do this without the help and support of a number of third parties who have contributed to writing this update. Their contributions range from inputting into the scope, sharing data, giving us their insights on the market, providing copy, and peer reviewing drafts. So, a big thanks to: Chris Cox, Dominique Butters, Hugo Wood, Lawrence Campin, Marcus Stuttard, Neil Blankstone, Sam Barton, Tony Whincup, Dr Stuart Rollason and Van Hoang. Their input is invaluable, but needless to say any errors or omissions are down to us. We have relied upon MICAP for most of the data that we have based the report upon. MICAP is part of the same group of companies as Intelligent Partnership. We also carried out our own extensive desk research and interviews to verify their data. The update is made possible by our sponsors, who have contributed copy to the report and supported us by helping to meet production costs. So, a big thanks to: Blackfinch, Blankstone, Close Brothers, Puma, Sarasin and TIME.
Business relief qualifying shares and share sales Business Relief allows investors who hold Business Relief qualifying shares to sell those shares. As long as they purchase replacement Business Relief qualifying shares within three years of the sale, the two year BR qualification clock is not reset. As the examples of Earthport, WYG and PTSG show, there are examples where it may be worth investors considering earning an immediate windfall, which can then be reinvested in other options a manager considers better long term value. However, investors should be aware of the risk that, should they pass away in between an investment being sold and any replacement shares being acquired within the three year window, they would not be able to claim Business Relief
acknowledgements and thanks
Find out more at MANAGERS IN FOCUS
Readers can claim up to 2 hours’ CPD (excluding breaks). By the end of the update, readers will be able to: • Identify the main developments and news in the AIM market. • Outline the impact of Covid-19 on AIM. • Benchmark products and providers in the market against one another • Evaluate the key fees and charges applied by AIM BR managers • Describe the growing importance of ESG on the AIM market • Define some of the key events likely to impact AIM in the near future
learning objectives for cpd accreditation
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After you have reviewed this publication and before we fulfill your CPD certification request, we will be requesting your feedback on it. Your collaboration will assist us to enhance the learning activity, and will inform improvements to future publications. Information about claiming CPD can be found at the back of this update.
AIM Options increase The UK listing Review
This Update wouldn’t be possible without the help and support of a number of third parties who have contributed to the writing of this update. Contributions include helping develop the initial scope, providing data and information, providing insights on the market, providing copy and reviewing content. So, a big thanks to: Sam Barton, Stephen Daniels, Marcus Stuttard and Hugo Wood. We have relied upon MICAP for most of the data in that we have based the Update upon. MICAP is part of the same group of companies as Intelligent Partnership. We also carried out our own extensive desk research and interviews to verify their data. This update is made possible by our sponsors, who have also contributed copy to the Update and supported us by helping to meet production costs. So thank you to: Close Brothers, Sarasin and TIME.
Readers can claim up to 2 hours’ structured CPD (excluding breaks). By the end of the update readers ill be able to: • Identify the main tax advantaged products available in the AIM market • Pinpoint the key developments and news in the AIM market over the past quarterUnderstand the effects of M&A in the AIM markets • Determine how the AIM market has performed, and some of the factors that contributed to this performance • Benchmark current products and providers against each other on key investment criteriaRecognise various factors that will affect the AIM market in the months to come. • Understand the effects of M&A in the AIM markets • Recognise various factors that will affect the AIM market in the months to come
INTRODUCTION / update overview
INTRODUCTION / KEY FINDINGS
1/3
of AIM tax-advantaged offers have income option
37
tax-advantaged AIM funds (May 21)
of AIM tax-advantaged offers have initial charge
13
EIS and VCT managers have had AIM-based offers
15
new companies joined AIM
0.47%
average initial charge is dropping
left the AIM market in 2020 due to financial distress or insolvency
Companies
End April, 2021
AIM at historic high
1,284
key findings
Q1 2021,
2. Market Update
AIM PERFORMANCE DURING COVID-19 FCA LOOKS TO REFORM SUSPENDED 10% RULE REGULATORY UPDATE The Benefits of buliding an AIM portfolio ALTERNATIVE INVESTMENT MARKET WAKING UP TO ESG 2020 - THE YEAR THAT GROWTH BECAME VALUE TAX-EFFICIENCY AND AIM INVESTMENTS What the managers say
2. Market update
MARKET UPDATE / AIM PERFORMANCE DURING COVID-19
After an initial Covid-19 induced fall, AIM bounced back to reach record highs within a year, and has continued to impress
hen the Covid-19 pandemic first hit global markets, AIM was not immune to its effects. It’s index score fell from 972 on 15 February to just 623 by March 14th - it’s lowest level in five years. AIM was not alone, and even supposedly ‘safer’ markets - such as the FTSE 100 and the main US markets, also suffered precipitous falls along similar lines. The 12 months that followed saw an uneven recovery, globally. While some sectors - such as technology and green energy performed extremely well, others - largely traditional sectors such as hospitality, banking and fossil fuel companies - struggled to reach their pre Covid-19 levels. Many are still trading well below pre Covid-19 levels. In the case of AIM, the recovery was swift. It had reached it’s pre Covid-19 peak by the end of August, and by the end of the year it was even trading above it’s 2018 peak (which had preceded a dramatic fall itself). By the end of April, just over 13 months after it’s dramatic fall, AIM was trading at record levels - breaking the 1250 score for the first time in its history.
W
Reasons for the strong performance
Traditionally, smaller companies tend to struggle more in times of economic difficulty, and while many smaller companies did indeed struggle, the fact is AIM outperformed the FTSE main markets last year, by a substantial margin. While AIM companies might not be as large in general as a FTSE 350, 250 or company in general, there are also a number of larger companies on AIM, compared to earlier in its lifespan. Companies like ASOS and BooHoo, which are worth billions, were able to weather the initial squeeze, and find the capital to exploit the growth opportunities when they arose. And these opportunities arose for many companies. As mentioned, the recovery has so far been uneven, with certain sectors recovering quicker than others. The AIM market is well diversified, with good representation from many sectors. Whereas the FTSE 100 is over represented by traditional financial and energy companies, AIM boasts an array of e-commerce, tech and green energy companies, all of which performed extremely strongly in 2020.
ASOS
Source: LSE 1 June 2021
While traditional bricks and mortar stores struggled and even closed down, online retailers thrived as customers were forced to remain at home. This resulted in a jump in share prices for many of these companies, including AIM giant ASOS, which saw its shares bump over 300% between March 2020 and March 2021. The start of 2021 saw the company also buy a number of traditional high street names such as TopShop and Miss Selfridge from Sir Phillip Green’s Arcadia Group.
Ceres Power Holdings
Hydrogen fuel cell and engineering producer Ceres was one of the big winners of 2020, as world leaders, consumers and investors alike looked for an alternative to traditional fuel options. Aswell as Covid-19 straining oil supply chains, an OPEC price war also hastened the need for renewables. Although some of its 2020 gains were erased over Q1 2021, they still remain substantially above their early 2020 levels.
The video game publisher, best known for the Worms series, saw its shares continue to grow well into Q1 2021, before a drop at the end of February 2021. Team 17 was part of a wider growth story among software and digital entertainment providers. People stuck at home with little else to do turned into the ideal consumer for companies such as Team 17.
Team 17 Group
Of course, while many companies in AIM performed strongly in 2020, there were companies which underperformed, and potentially crashed out of AIM. This is why due diligence and diversification are so important, and why AIM fund managers tend to invest in a wide number of companies. That said, evidence so far suggests that, on the whole, the AIM market coped well in the aftermath of Covid-19. According to UHY Hacker Young, just 7 companies left the AIM market in 2020 due to financial distress or insolvency. Out of around 800 companies, this is a tiny amount (less than 1%), and is a notable improvement from the 87 that left for the same reason the year after Lehman Brothers went bankrupt. In fact, UHY Hacker Young said last year saw the lowest number of companies leaving AIM for these reasons on record. There are a few reasons why AIM might be coping better. As mentioned, the AIM market is now more mature, featuring large companies that are less likely to go under. Confidence also begat confidence, as AIM companies were able to raise substantial amounts of money over the year to take advantage of the growth opportunities. A total of £5.2 billion was raised over 2020 in secondary issues, the most in a decade, as companies such as Greencoat Renewables raised tens to hundreds of millions of pounds to fund further growth. This added new liquidity into the market, helping to negate some of the risks typically associated with investing in AIM. It is also possibly a sign that the myth of AIM being a ‘wild west’ of investment is no longer true (if it ever was). AIM regulations have evolved over time, and a number of important changes were brought into place in 2018, which will have helped investors more confidently assess each company as a potential investee. For example in 2018, AIM Rule 26, which was itself introduced in 2007 in order to improve visibility of company information, was updated to include a requirement that companies ‘comply or explain’ and provide details of a recognised corporate governance code that they adhere to in their corporate practices. With a more mature reporting environment alongside some more mature companies, AIM was clearly better able to weather 2020’s economic storm than it had done in previous recessions.
2021 - a return to earth
While AIM witnessed extremely strong growth during the second half of 2020 and Q1 2021, since the start of May, the Index score has fallen notably - from a historic high of 1,284 at the end of April to 1,262 at the time of writing. This is partly the result of wider economic pressures. As inflation has crept up, markets have calmed down - with growth shares (which AIM has a number of) retreating from their post pandemic high as a result. Of course, it’s important to keep this fall in perspective - this is still almost double it’s pandemic low score, and it still remains higher than at any time between 2008 and 2020.
FTSE AIM All Share index
AIM performance during Covid-19
With AIM’s proven success at attracting capital for smaller companies, the potential tax benefits of investing on AIM and a tangible wealth effect from higher house prices, the investment backdrop is supportive.
- Sam Barton, Close Brothers Asset Management
MARKET UPDATE/AIM PERFORMANCE DURING COVID-19
FCA looks to reform suspended 10% drop rule
With markets still volatile following the Covid-19 outbreak, the Financial Conduct Authority (FCA) has extended its extension of the 10% depreciation notification suspension until the end of the year, as it consults on reform
n 2020, the FCA temporarily suspended the 10% drop rule for investment managers, as a combination of Brexit and Covid-19 wrought havoc with financial markets.
The initial suspension lasted until October 2020 and was then extended until March 2021. But now the FCA has extended it until the end of 2021, and announced plans to review its effectiveness and consult on potential changes. As part of the suspension, the FCA won’t take action if a firm breaches COBS 16A.4.3, so long as it has done the following:
Investment firms providing the service of portfolio management shall inform the client where the overall value of the portfolio, as evaluated at the beginning of each reporting period, depreciates by 10% and thereafter at multiples of 10%, no later than the end of the business day in which the threshold is exceeded or, in a case where the threshold is exceeded on a non-business day, the close of the next business day.
What is the 10% depreciation notification?
For clients of BR and EIS portfolio managers, this means they and their advisers may wish to keep a closer eye on their investment portfolio, as they may not be informed if their investment value drops suddenly. However, the 10% drop rule has been criticized in the past for pushing investors to make panicked, short term investment decisions, which runs counter to higher risk. For example, if an investor had exited a fund in early March 2020, having received notifications of investments dropping, they may have sold in the dip, and not benefited from AIM’s rapid recovery. At the same time, it also increases costs for managers and creates additional administrative hassles which together could potentially lead to increased client fees. This would have been compounded by wider market volatility caused by the Covid-19 pandemic and nearing Brexit deadlines. Until the consultation and review findings are released, it is impossible to say what format it will return in, and whether the FCA will make any notable changes that could make it more suitable for AIM investment managers.
• Issued at least one notification in the current reporting period, indicating to retail clients that their portfolio or position has decreased in value by at least 10% • Informed these clients that they may not receive similar notifications should their portfolio or position values further decrease by 10% in the current reporting period • Referred these clients to non-personalised communications, perhaps made available on public channels, that outline general updates on market conditions (these could contextualise potential drops in portfolio or position value to help consumers meet their objectives, rather than making impulse decisions about their investments) and • Reminded clients how to check their portfolio value, and how to get in touch with the firm
MARKET UPDATE /FCA looks to reform suspended 10% drop rule
10%
Depreciation notification
Regulatory update
hile the Government has so far refrained from any radical changes to policy, the sum of its budget and tax changes could have a significant impact on the use of BR, EIS and VCTs as well as the wider AIM market, where investees of these schemes are allowed to be quoted.
The Budget
UK Chancellor Rishi Sunak used his March budget to launch what he termed an ‘investment led recovery’. This included the launch of a number of new investment funds, as well as a freeze on a number of tax allowances. The effect of both of these are likely to increase the popularity of BR investments into AIM.
Business Relief drivers and AIM
In the Budget, Sunak froze the tax thresholds for income tax bands, lifetime pension allowances, the nil rate band and residence nil rate band until 2026. The latter three in particular are likely to drive investors looking at their estate planning options towards gifting and BR measures to ensure the effects of inflation don’t eat away at their estates. For much of the past year, inflation has been well below the Bank of England’s 2% target, as lockdowns kept workers indoors, and prevented them spending money, while a price war drove down the price of fuel. With these measures now easing, the BoE expects inflation to bounce back up, reaching 2% by the end of the year. Assuming the 2% target is sustained until 2026, this will see the amount of IHT due dramatically increase.The below chart displays how a £325,000 estate today that grows in line with inflation would see it’s value jump 10% to £358,826 in 2026. Unless mitigating actions were taken, that additional £30,000 would receive a 40% IHT bill - despite the purchasing power of the estate not increasing over that time. Over the same period, a £1,000,000 estate that increased in line with inflation would see an extra £104,080 - resulting in an additional £41, 632 in IHT - unless mitigating steps were taken. The additional freeze to the residence nil rate band (RNRB) at £175,000 is likely to also have a dramatic effect. Property price increases are a key driver of inflation, and numerous estates have much of their wealth tied up in property, thanks to spiralling housing costs over recent decades.The Equity Release Council reported that, by the end of 2020 the amount of private UK property equity was a record £4.6 trillion, and that has continued to rise since. Thanks to Government initiatives over Covid-19, such as the stamp duty holiday, house prices have continued to rise, despite wider economic uncertainty. Even with annual inflationary increases, RNRB would not have necessarily kept up with increasing house prices, however it would have remained closer. In March, for example Savills - one of the UKs largest estate agents - revised up its house price prediction for 2021 to 4%, substantially above the BoE’s 2% inflationary target.
Property prices may well continue to rise. The Government created a mortgage guarantee scheme in the budget, offering lenders which offer 95% mortgages on properties worth up to £600,000, compensation on a portion of net losses in the event of repossession. The scheme is open until 2022. This is clearly designed to increase the number of 95% mortgages available, which will in turn help increase the demand side of the housing market, creating pressure on prices. In May, the Government revealed plans to reform planning permission laws, in order to increase the supply of housing stock, however this will take time to take effect, and thus the pressure on housing prices seems likely to continue for some time, barring a wider economic event. All this means that clients are likely to see their potential IHT bill increase over the next five years as the value of their main property grows, while the amount of RNRB eligible estates can claim remains the same. One further point to consider is a freeze to lifetime pension allowances. Pension pots do not form part of an estate, and generally do not attract IHT. With this allowance frozen, there will be less scope for higher earners to use pensions as part of their estate planning strategy, again thanks to the inflationary effects of time.
With estate values rising, and NRB and RNRB frozen until 2026, IHT revenues are predicted to rise over the coming years. The Office for Budget Responsibility (OBR) is predicting that the next two years may see a slight decline in IHT receipts, due to the effects of the pandemic on equity and house prices. That said, the OBR predicts that the changes made in the budget will see the Government collect an extra £450 million pounds in IHT by 2025/26. This was partly as a response to the budget changes, but also on the back of better than expected economic performance in Q1. Of course, any increase in demand for estate planning may well encompass BR and any increase in demand for BR strongly implies an increase in demand for AIM shares from BR AIM managers to meet the requirements of individuals pushed into incurring IHT liabilities.
Similar considerations apply to the popularity of both VCT and EIS investments in the context of the frozen Capital Gains Tax Annual Exempt Amount (frozen at the 2020/21 level) and the Income tax personal allowance (frozen at the 2021/22 level until April 2026). The tax-free dividends, upfront income tax relief and tax-free growth offered across the schemes is likely to be very attractive to those who find their income and asset values pushed up by inflation, wage growth and pent up demand. They may then find themselves pushed over the threshold of their allowances and end up with more income tax and CGT to pay. This could encourage people to seek the income tax reliefs available through EIS and VCT. While fewer AIM-listed companies qualify for EIS or VCT than BR because of the more stringent eligibility requirements, historically at least 10 VCT and three EIS investment managers have run AIM-based offers. VCT AIM offers in particular have multiple share classes and top up offerings, but are more likely to be open towards the end of the tax year to facilitate last minute tax-planning for specific periods. The potential for increased liquidity in comparison to private company EIS and VCT offers is one of the benefits of AIM shares. Meanwhile, AIM shares can be popular with VCT investors as their eligibility to be held within stocks and shares ISAs can theoretically enable an investor to subscribe more than the VCT annual maximum and receive tax-free dividends and growth on the additional level of the investment held within the ISA.
Impact on IHT
VCT and EIS drivers and what they could mean for AIM
Tax Day changes
In 2018 and 2019, the Office for Tax Simplification (OTS) released two reports, looking at how the Government could reform IHT to make it simpler and more efficient. On Tax Day in March 2021, the Government finally responded to the first of these reports, implementing a number of changes, based on the recommendations. This first report was mostly focussed on simplifying the administrative side of IHT. Importantly, it shows the Government is working its way through the OTS’s IHT recommendations. The second report looked more closely at the applications and practicalities of IHT and various IHT reliefs, including the qualification of AIM shares for BR. As a result, the Government’s response to the second report may have more far reaching ramifications. For a refresher on what some of the bigger issues are, see ‘What’s on the Horizon’
Source: propertydata.co.uk
Clients investing in AIM can benefit from smaller company exposure and could also gain 100% IHT relief after just two years if they are holding them at the time of their death thanks to Business Relief qualification
Source: Office for budget responsibility
VCT and ISA annual allowance
Annual house price change Annual change
MARKET UPDATE / Regulatory update
- Martin Perrett, Blackfinch
How do you feel about the political landscape and Brexit?
In many ways, the unexpectedly large majority should help offer some political hegemony as we enter the uncharted waters during and after the current crisis. To some extent, it is disappointing that a period where political change could be affected will ultimately be truncated.
02
What has been a big highlight for you over the past year?
While it was good to deliver strong investment performance as a large number of our holdings delivered excellent operational results and validate one’s long-term view, there is always a feeling of frustration when companies get taken over at a discount to what you think is a fair price.
03
hugo wood
Portfolio Manager / Analyst, Sarasin & Partners
While there have been many, three are worthy of particular mention: our returns ahead of the ARC AIP series over 1,3 and 5 years, the breadth and depth of our ESG engagement with AIM companies, and enhancements to our quarterly investment reports that – we believe – provide unrivalled clarity and detail.
Following almost four years of political deadlock, the UK’s departure from the EU in early 2020, combined with the largest majority won by a single party in a generation, provided much-needed stability. A Conservative government with a strong mandate provides arguably the most business-friendly backdrop from a fiscal perspective.
What are the big opportunities you’ve been seeing in the market in the past year?
With each passing year the quality of companies listed on AIM improves. As important to us, however, are the improving thematic credentials of the market. We are seeing a growing number of opportunities to invest in companies that directly benefit from the themes that we study.
01
Our thematic work produces investment ideas across the market cap spectrum. AIM is no exception, and we have repeatedly found small AIM-listed businesses that benefit from exposure to global multi-decade themes.
stephen daniels
Head of Investments and Partner, TIME Investments
Our AIM service went through its three-year anniversary last November and while it is continuing to seek to deliver attractive risk-adjusted returns to investors, the portfolio has not been immune to the Coronavirus related falls in the equity markets.
The Conservative Party majority has provided political clarity for the first time in a few years, which is helpful for the domestically focussed stocks on AIM. We welcomed the March 2020 budget, which had no changes to BR or AIM.
We continue to focus on the larger and higher quality companies listed on AIM and those with a history of attractive dividend yields. The recent market correction has represented a potentially opportune period to buy such companies at more attractive prices.
The AIM market is inherently volatile, as evidenced by the dramatic market movement in 2020, so it is essential that it is recommended for all the right reasons.
Coping with Coronavirus Beyond the Coronavirus Recent Performance 2019 Performance An International Market? Budget Update What the Managers Say
AIM Acquisitions Better Reporting
3. INdustry analysis
Market Composition Fees and Charges Sector Diversity
4. considerations for investment
Close Brothers Sarasin & Partners TIME Investments AIM Solutions Comparison
Coronavirus Impacts The non Covid-19 Future What the Managers Say
thought leadership
Neil Blankstone
Director of Blankstone Sington
The BENEFITS OF Building an AIM portfolio
MARKET UPDATE / THOUGHT LEADERSHIP
11
Building an AIM portfolio is about building for the long-term, with ‘time in the market’ as important as any other exchange.
hen looking to invest in AIM stocks, the fundamental principles are not materially different to investing in other areas. The ultimate ambition is always the same; to create a portfolio that has merit in its own right. With AIM however, there are a number of other factors to be taken into consideration when assessing suitability, not least qualification for business relief and issues surrounding lack of liquidity. At Blankstone Sington we follow a few core investment principles that include… AIM lends itself to being a stock-pickers paradise, and with such a broad spread of sectors and companies it becomes about the portfolio as a whole - the blend - with recognition that it is important to diversify but not “diworsify”. Each component has its merit, but you do not have to love each stock 100% of the time. If they all move in sync, there is a danger that you will have created an extra level of risk. The adjustment to holdings within a portfolio, with the introduction of new investments, is only ever undertaken as a reflection of a change in analysis, or because the percentage held in one stock versus the opportunity in another has got out of kilter. Competition for capital leads to a natural rebalancing of portfolios particularly once the valuation metrics of one has been left behind or a rise in value of another has got ahead of itself. Building an AIM portfolio is about building for the long-term, with ‘time in the market’ as important as any other exchange. AIM can, however, be materially affected by short-term thinking and opportunity to a far greater extent. Being vigilant and alert to change are critical to improving returns.
contact
blankstoneSington.co.uk 0151 236 8200 Enquiries@BlankstoneSington.co.uk
• That wealth creation results not from how much you gain when you invest well, but how much you lose when investments turn out not as forecast, • That size matters – targeting sub £250m market cap companies offers a larger investable universe that is under-researched, providing more alpha generating opportunities as a consequence of more frequent and bigger pricing anomalies, • That founder led companies tend to outperform, sometimes by a large multiple. We often look for companies where the founder still has ‘skin in the game’. • That dividend or near dividend paying, with room for double digit growth, shows a strength of cash flow.
sam barton
managing director, close brothers asset management
beyond the coronavirus
market update / THOUGHT LEADERSHIP
n four short months, a previously unknown coronavirus has spread from a market in Wuhan, China, across the entire world. The pandemic has caused an unprecedented global lockdown. As the responses of governments, central banks and other authorities were at first considered insufficient, shares went into freefall and headed towards their quickest ever bear market. A rush for dollars (momentarily at least) caused many other assets to be liquidated. Hard panic had set in. While this has been unnerving for investors, it’s more important than ever to remain calm and place current events in their historical context. Coronavirus has ended a decade-long bull run for global equities, but at some point the bull will return. In the Close Inheritance Tax Service, we were already treading cautiously going into the bear market. By the end of 2019, some companies we owned in the service were acquired and when looking to reinvest the windfall, it was tricky to find what we considered good value for investors. Our response to the Coronavirus has been to work tirelessly to protect the value of every pound clients have entrusted to us. This includes engaging with the companies we own that may be challenged by the outbreak. Among others, we need to focus on companies with high net liabilities and those seeing their working capital unwind:
In the face of some of the most extreme trading conditions we have ever seen, we have forensically analysed balance sheets, liquidity and debt profiles to develop a list of companies which we believe will emerge stronger from this downturn. These are ones with either net cash or manageable levels of debt and good, consistent revenue over time (often family/founder-led businesses). Because these types of companies are so popular, they usually trade at a high premium – something compounded by the prolonged bull market. With the recent sell-off, there will be opportunities to pick up companies that have been oversold, with the potential to generate good returns for investors. Our job now is to remain focused on what is ahead. With the adage ‘never catch a falling knife’ in our minds, we are continuing to take a cautious view when allocating capital, even if we are likely to increase the number of holdings to the top end of our usual 25-35 range. We will add to portfolios incrementally and in smaller position sizes until we reach a comfortable standard size. The current market offers an attractive entry point for long-term investors, however with high volatility companies can be mispriced in the short-term.
• Those which may have to stop or drastically cut their dividends • Those which may need to raise capital (which would dilute our equity) • Those which have high net debt/EBITDA ratios (are too leveraged) • Those at risk of being nationalised ‘by the back door’ via conditional government loans, which may later be converted to shareholder equity
- NEIL BLANKSTONE
Tony Whincup
Investment Specialist Close Brothers Asset Management
Alternative Investment Market waking up to ESG
Active voting remains the one aspect of responsible investing where investors in AIM-listed companies have a tangible and proactive voice to promote best practice, corporate governance and sustainability
he Coronavirus pandemic has reminded families of the fragility of life; that taking stock and taking action on important issues can help reassert control, and possibly even make tomorrow better than today. Responsible investing naturally chimes with themes of fragility and legacy . One aspect – ESG or Environmental, Social & Governance – is also gaining traction in a part of the market hitherto not typically associated with it: Alternative Investment Market (AIM) shares, some of which are eligible for Business Relief (BR) and thereby shelter investors from Inheritance Tax (IHT) after as little as two years. For the last 20 years, Close Brothers Asset Management have been running a service that capitalises on this relief. Whilst the Close Inheritance Tax Service (CITS) does not specifically target ESG as one of its objectives, many of our investee companies have been committed to reducing their environmental impact and, even before it was a recognised theme, improving their ESG standing. Hearteningly, many of our larger investee companies in CITS scored well through an ESG screen, including Jet2, the package holiday company; Watkin Jones, the build-to-rent property developer; and IG Design Group, a global leader in gift wrap and cards. Is this coincidental or a consequence of the quality of our proprietary research? The broadening coverage of third-party ESG data is undoubtedly welcome. It may independently validate or challenge our research findings and offers a handy additional filter. Yet given their often different methodologies and outcomes, they will only ever supplement our understanding and never be a short-cut for independent, proprietary research. Recent controversies in the media involving companies with strong ESG ratings show the subjectivity of disentangling and understanding complex supply chains, labour laws and social contracts in a hyper-connected world. And without doubt, some companies may view ESG as a tick-box exercise to achieve good PR – an approach whose elastic limit may stray into ‘greenwashing’. Within our CITS portfolios, there are many examples of forward-thinking companies making ESG a priority; to emphasise that maturity is no barrier to best practice, the businesses below have been trading for an average of over 170 years: Whilst these examples emphasise mostly the E or S of ESG, traditionally it is digging deeper on the G where our smaller companies team often identifies material risks to an investment case. This may result in declining to invest, engaging with the board prior to investment or seeking to help boards attain and maintain the highest standards. Our investors seldom hear of these interactions but they are essential. Part of our financial stewardship is to bring a collective voice to your clients’ best interests. We chose specialist third-party company Institutional Shareholder Services (ISS) as our voting platform and research partner, and our internal voting panel of research analysts and investment managers determine how we vote according to our voting policy . Active voting remains the one aspect of responsible investing where investors in AIM-listed companies have a tangible and proactive voice to promote best practice, corporate governance and sustainability; it is increasingly essential that they use it. We use our full expertise: our smaller companies team works alongside the Head of Responsible Investment and Research; we are a signatory to the UN PRI and the Close Brothers Group itself has attained the highest ESG rating possible . There is a rather neat and intuitive simplicity about the relevance of ESG to inter-generational equity, Responsible Investing and wealth planning. And it is doubtlessly true that many companies have always done ESG well, long before committees were formed and specialists created - just as our analysis of companies in CITS portfolios has always identified risks and opportunities. Whether a portfolio is an ESG offering or not, it’s heartening to know that there is a growing link between conscionable investing and legacy in the IHT arena. The full version of this article can be found here.
1. CBAM’s response to responsible investment is to integrate the evaluation of ESG factors within our investment research process and to reinforce the focus on ESG issues through active engagement. See our Responsible Investment Policy. | 2. FW Thorpe Carbon Offsetting project, 21 May 2021. | 3. James Latham as at May 2021. | 4. CBAM figures via ISS, FY2019/2021, and 2021 year-to-date. A full breakdown of our voting record is available upon request. | 5. UN PRI is the United Nations Principles for Responsible Investment. CBG is the FTSE250 company of which Close Brothers Asset Management is part.
• Lighting specialist FW Thorpe: in 2009 it initiated its own carbon-offset scheme, to plant trees in Monmouthshire. At maturity, more than 200,000 trees will sequester an estimated 42,000 tonnes of CO2. (Just one 326w light bulb may use enough electricity during an average 20 year lifespan to create ~17 tonnes of CO2) . • Timber importer and distributor, James Latham, is a signatory, advocate and active member of several bodies, including Forests Forever, WWF and The Timber Trade Federation’s Responsible Purchasing Policy. Employees and suppliers commit time to woodland husbandry .
closebrothersam.com/ifa 01606 810325 ifaclient@closebrothers.com
Director Blankstone Sington
hen looking to invest in AIM stocks, the fundamental principles are not materially different to investing in other areas. The ultimate ambition is always the same; to create a portfolio that has merit in its own right. With AIM however, there are a number of other factors to be taken into consideration when assessing suitability, not least qualification for business relief and issues surrounding lack of liquidity. At Blankstone Sington we follow a few core investment principles that include…
AIM lends itself to being a stock-pickers paradise, and with such a broad spread of sectors and companies it becomes about the portfolio as a whole - the blend - with recognition that it is important to diversify but not “diworsify”. Each component has its merit, but you do not have to love each stock 100% of the time. If they all move in sync, there is a danger that you will have created an extra level of risk. The adjustment to holdings within a portfolio, with the introduction of new investments, is only ever undertaken as a reflection of a change in analysis, or because the percentage held in one stock versus the opportunity in another has got out of kilter. Competition for capital leads to a natural rebalancing of portfolios particularly once the valuation metrics of one has been left behind or a rise in value of another has got ahead of itself. Building an AIM portfolio is about building for the long-term, with ‘time in the market’ as important as any other exchange. AIM can, however, be materially affected by short-term thinking and opportunity to a far greater extent. Being vigilant and alert to change are critical to improving returns.
- TONY WHINCUP
HUGO WOOD
Hugo Wood Portfolio Manager
2020 - the year that growth became value
The potential returns achievable from investing in the business are high enough that shareholders are better served by this reinvestment compared to other forms of capital allocation, such as dividends.
here is much discussion around growth and value investing, two methodologies that are occasionally overlapping but mostly divisive, each describing an investment bias towards equities that are usually at differing stages of maturity and valued differently by the market. This is not to say that substantial returns can’t be made using both approaches, despite the underlying fundamentals usually looking very different. Headline market returns often obscure contrasting behaviours in these style groups and certain economic conditions often favour one over the other. 2020 was an unusual year in that growth stocks fared significantly better than their value counterparts for the first three quarters despite considerable economic uncertainty, before ceding ground in the final quarter.
Growth vs Value
The division between growth and value stocks is usually made using valuation metrics, but this approach often fails to recognise other, more fundamental differences. Growth companies are more likely to retain their cash flow in order to invest behind their product or service, fuelling higher revenue growth at sustainable margins. The potential returns achievable from investing in the business are high enough that shareholders are better served by this reinvestment compared to other forms of capital allocation, such as dividends. The category of value stocks is perhaps broader, including companies that have cheap shares due to being in distress as well as the more typical mature companies with lower revenue growth, stable margins, higher cash generation, and greater dividend pay-outs. The growth prospects of the company may be more closely linked to wider GDP growth and, in some instances, may be in decline due to disruption by growth companies.
The last few decades of declining interest rates have broadly favoured growth stocks over their value peers, but this masks shorter term fluctuations that tend to be governed by risk sentiment. Growth stocks have performed well during times of economic growth and investor confidence. Heavy corporate investment, and the more speculative future cash generation that comes with it, is acceptable to the risk-taking investor as they foresee attractive revenue growth underpinned by healthy economic conditions. In times of economic stress or investor uncertainty the opposite often holds, with sharp corrections in growth stocks during ‘risk-off’ periods as investors rotate into value stocks with more certain cash generation and lower valuations. The final quarter of 2018, in which US interest rates expectations began to rise despite a relatively modest global growth outlook, is the most recent reminder of this.
Typical style behaviour
The onset of the global pandemic in early 2020 created many familiar conditions as described earlier. Growth expectations were reduced and financial stress unavoidable, with most economies falling immediately into recession. Yet, in the first three quarters of the year growth stocks significantly outperformed value stocks. The cause was a factor as yet unseen in the periods of economic difficulty preceding 2020; that of a recession caused by changing consumer habits. Confined to their homes, consumers were simply unable or unwilling to purchase goods and services in the same way as before, and preferred, for example, online services over physical interactions. This shift in preferences generated heightened demand for some of the more disruptive growth companies on AIM, companies that typify the growth cohort. The value companies that would normally be in heightened demand during times of economic difficulty saw their attractive characteristics dwindle, on the other hand, as typically robust demand for their goods and services disappeared. After a few weeks of confusion investor preference clearly shifted towards the companies that were either likely to remain relatively unaffected by the impact of the pandemic, or better still those companies that would accelerate their growth prospects. It was an extraordinary year, in which growth became value.
How 2020 was different
sarasinandpartners.com 020 7038 7037 sales@sarasin.co.uk
he Coronavirus pandemic has reminded families of the fragility of life; that taking stock and taking action on important issues can help reassert control, and possibly even make tomorrow better than today. Responsible investing naturally chimes with themes of fragility and legacy . One aspect – ESG or Environmental, Social & Governance – is also gaining traction in a part of the market hitherto not typically associated with it: Alternative Investment Market (AIM) shares, some of which are eligible for Business Relief (BR) and thereby shelter investors from Inheritance Tax (IHT) after as little as two years. For the last 20 years, Close Brothers Asset Management have been running a service that capitalises on this relief. Whilst the Close Inheritance Tax Service (CITS) does not specifically target ESG as one of its objectives, many of our investee companies have been committed to reducing their environmental impact and, even before it was a recognised theme, improving their ESG standing. Hearteningly, many of our larger investee companies in CITS scored well through an ESG screen, including Jet2, the package holiday company; Watkin Jones, the build-to-rent property developer; and IG Design Group, a global leader in gift wrap and cards. Is this coincidental or a consequence of the quality of our proprietary research? The broadening coverage of third-party ESG data is undoubtedly welcome. It may independently validate or challenge our research findings and offers a handy additional filter. Yet given their often different methodologies and outcomes, they will only ever supplement our understanding and never be a short-cut for independent, proprietary research. Recent controversies in the media involving companies with strong ESG ratings show the subjectivity of disentangling and understanding complex supply chains, labour laws and social contracts in a hyper-connected world. And without doubt, some companies may view ESG as a tick-box exercise to achieve good PR – an approach whose elastic limit may stray into ‘greenwashing’. Within our CITS portfolios, there are many examples of forward-thinking companies making ESG a priority; to emphasise that maturity is no barrier to best practice, the businesses below have been trading for an average of over 170 years:
Henny Dovland
Business Development Director time investmens
Tax-efficiency is the most important criteria for advisers when considering AIM investments
A
Investors looking for tax-efficient growth are increasingly considering investing in AIM companies
new study among advisers and wealth managers conducted by TIME Investments, a leading specialist in estate planning services, reveals that 82% of advisers expect more clients to invest in AIM during this year’s ISA season compared to last year. The research also revealed the most important factors advisers look for when recommending AIM investments to their clients.
Tax efficiency
The appeal of AIM lies not just in its ability to generate attractive investment returns; some companies listed on AIM also qualify for Business Relief, which can offer Inheritance Tax (IHT) relief to investors. To encourage investors to support growth businesses, the government offers a tax relief called Business Relief (formerly known as Business Property Relief). Many companies can qualify for this tax relief, including some companies listed on AIM. Once shares in qualifying companies have been owned for a minimum of two years and at point of death, the shares are free from IHT. Over half of advisers (54%) cited the IHT benefit AIM investments can offer as one of the most important factors. Only 4% advisers said that an IHT benefit was not important when making their recommendation, showing that it is a key driver for investing in AIM for many advisers. The government also continues to incentivise investment in AIM: since 2013, AIM shares can be held in ISAs which means that investors can enjoy tax free growth and dividends. This means that investors holding BR-qualifying AIM shares within an ISA can create a tax-efficient investment with no Income Tax, Capital Gains Tax or Inheritance Tax.
time-investments.com 020 7391 4747 questions@time-investments.com
AIM is the junior market on the London Stock Exchange and is often perceived to be more volatile than the main market. Just over half of advisers (52%) said they look for an investment process which delivers lower volatility. AIM listed companies do not have to adhere to a minimum trading period, which means they may have only been around for a short period of time. There are also particular sectors such as mining and exploration that historically have proved very volatile and experienced significant company failure rates. But it is also home to companies operating in thriving areas of the global economy, like healthcare, clean energy, and technology. Many AIM fund managers seek to reduce this volatility by using data-driven screening processes or traditional fund manager stock picking strategies. 50% of advisers look for AIM managers that invest in larger and more established companies. Nearly half of advisers (48%) look for portfolios with diversification, to reduce specific company and sector risks. 48% of advisers also look for the inclusion of profitable, dividend paying companies.
Risk and volatility
Surprisingly, the lowest scoring factor advisers consider is long-term growth. Only 44% of advisers cited this as one of the most important factors when recommending an AIM investment. Indeed 8% of advisers said this was not an important factor at all.
Investment growth
Investors could create their own portfolio of AIM listed shares or they could choose to invest with a fund manager with professional expertise investing in AIM. Not all AIM shares qualify for BR, therefore investors seeking IHT relief would be wise to focus on managers with specific experience in these types of investments and a long track record of achieving BR for investors.
Important Information Adviser research conducted by PureProfile among 50 UK-based professional financial advisers and wealth managers during February 2021. For professional advisers only. TIME Investments is a trading name of Alpha Real Property Investment Advisers LLP and is authorised and regulated by the Financial Conduct Authority. The levels and bases of, and reliefs from, taxation may change in the future. Any favourable tax treatment, such as Business Relief, is subject to government legislation and as such may change. The information contained in this article does not constitute and should not be construed as constituting investment or any other advice by TIME.
Hugo Wood
Portfolio Manager
what the managers say
Have you seen any changes in client behaviour as a result of the pandemic?
Despite increased volatility, the IHT relief mandate of the portfolios has remained unchanged. For 2021, clients have more visibility, with the outlook of the pandemic in the UK improving. We have seen an increased number of clients opening new or topping up existing Adapt AIM investments this year compared to the same period last year.
Do you think the Spring budget will affect the appeal of AIM and the investment offers that can include AIM quoted shares?
The Spring Budget announced further short-term support to aid the country in its recovery. To help balance the finances in the medium term, thresholds for VAT, CGT, and IHT have been frozen. In response to this, we expect ISA demand to increase, as well as IHT-optimised investment, with Business Relief from a subset of AIM stocks one of the solutions for this.
Why do you think AIM recovered so much more quickly than the main FTSE market last year?
AIM has a lower exposure to the oil and gas industry, a sector which struggled with declining oil prices in 2020, as well as lower exposure to traditional retail investment and banking. This is contrasted with greater exposure to technology and healthcare companies, which have performed well in the volatile economic conditions.
Van Hoang
Investment Manager Blackfinch
Coronavirus and the subsequent lockdowns have affected everyone over the last year or so – clients have been no exception. I would observe that the usual scarring of a long bear market did not happen last year and the speedy recovery in share prices has left investors surprisingly optimistic about prospects.
There was little specifically relevant to AIM, but three key trends were notable: higher taxes to pay for the pandemic; a drive for an investment-led recovery, and; support for the housing market. With AIM’s proven success at attracting capital for smaller companies, the potential tax benefits of investing on AIM and a tangible wealth effect from higher house prices, the investment backdrop is supportive.
AIM’s heavy weighting of high growth companies drove performance last year. These benefitted from accelerated technology adoption during the pandemic, record low interest rates (helpful for long duration assets including growth stocks) and a glut of capital. Many AIM companies were left behind in the rush. We have, however, seen a significant reversal of fortunes following vaccine approvals and the return of inflation.
Sam Barton
Managing Director Close Brothers Asset Management
Clients have reacted to the pandemic with remarkable resilience. The greatest change from our perspective has been the replacing of physical interactions with virtual ones, and most clients have adopted this new means of communication seamlessly. We expect this format to persist, and a number of our clients will certainly continue to remain flexible between virtual and physical interactions.
Each budget brings with it the chance of tax reform and revisions to the current Business Relief rules. Whilst the discourse throughout 2020 has focussed on a need to recoup pandemic-related government spending via higher taxes, the tone in recent weeks has shifted towards the anticipated growth in GDP fuelling a higher than previously expected tax take. This seems positive in delaying tax reform.
The stocks that dominate the main market include a number of mature companies that have limited growth prospects compared to the smaller names listed on AIM. The ability to continue to grow through 2020 by a number of disruptive AIM stocks, particularly in the technology and healthcare sectors, has been rewarded by a sharper recovery in their shares.
Hugo wood
Portfolio Manager Sarasin & Partners LLP
MARKET UPDATE / WHAT THE MANAGERS SAY
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So how are the managers feeling about the BR market and overall investment market conditions? Here's what they have to say.
Chris Cox
Fund Manager TIME Investments
The initial pandemic lockdowns created an environment where many clients were suddenly forced into remote living, potentially separated from family, friends and trusted advisers. This naturally created an initial slowdown of investment activity due to the contact barriers. As a business we quickly adapted to remote working and created processes to help advisers transact investment business remotely and securely. As the general population started to embrace virtual technologies, investment levels started to increase quickly. What seems very clear is that the pandemic has impacted us all and we have been witness to the suffering and human tragedy it has caused. It does appear to have heightened clients understanding of their own mortality and has, in some cases, accelerated their desire to put in place effective estate planning measures. This has been evidenced by increased Will writing activity and investment capital that has flowed into tax efficient investment solutions such as AIM.
Nothing was announced that directly effects the AIM market so we don’t expect any major changes to demand.
The AIM market has a significant concentration towards the largest companies by market capitalisation. Some of these companies were direct beneficiaries from the lockdowns which saw their share prices rise significantly (e.g. ASOS and boohoo which benefited from increased online shopping as the high streets were forced to close). There are also many gold miners on AIM which performed well as the price of gold rose to record highs. Finally, many small biotech and healthcare companies rose as many were involved in COVID-19 treatments and testing products. The FTSE on the other hand has a large exposure to oil companies and banks which struggled as the price of oil went negative and it was suspected many banks would struggle with falling interest rates and an expectation of increased bankruptcies and defaults.
Clients have largely remained pragmatic and sanguine in the face of the global pandemic. In recent months we have seen clients become more positive as a result of the UK’s vaccination programme and speed of economic recovery. We have also seen increased interest in the ESG agenda and related portfolios – a long term trend that seems to have peaked again in the last year.
The Chancellor’s freezing of personal allowances allied to encouragement for companies to invest provided a double boost to the economy and markets. Inflationary pressures and setbacks to COVID restrictions easing, however, will likely cause clients to pause and consider.
The bigger they come the harder they fall, and they don’t come much bigger than those listed at the top of the FTSE. Large inflexible organisations in a few key sectors were hit the hardest by lockdown one March – June 2020. The much talked about ‘V’ shaped recovery never happened and some giants of the FTSE have been permanently damaged. AIM on the other hand has a greater proportion of smaller more flexible businesses. While cash flow is an issue for some, the agility of many listed on AIM has paid dividends.
FEES and CHARGES MARKET STRUCTURE
3. Industry analysis
FEES AND CHARGES
CONSIDERATIONS FOR INVESTMENT / FEES AND CHARGES
deep dive into fees and charges
n this section we’ll break down some of the key fees and charges a client can expect to pay when using a tax-advantaged AIM investment service. This includes the single AIM EIS fund currently open. We will compare this data to the open AIM offers from previous snapshots we have taken. When comparing year on year changes, it’s worth remembering that in April 2020, there were 2 VCT AIM funds open, whereas as of May 2021, this was no longer the case, and this could have an impact on average fees.
It is also important to note that these tables show average numbers, and therefore there could be a reasonable amount of variation hidden behind them. For example not all AIM-based offers charge an initial fee to advised clients, but some charge fees as high as 2.5%. This can be affected by the product type as EIS and VCT offers may have a different fees structure to a typical AIM BR offer. Although this year there were fewer VCT offers than in April 2020, a single EIS fund remained. That said, a notable aspect of total fees has been a general average decline. As will be discussed, this is reflected in the wider market, where the costs associated with mainstream funds have also fallen.
The average reduction in initial charges has been largely driven by a decline in the number of AIM-based offers charging the fee at all. Just 12 of the 37 open offers on MICAP charged an initial fee at the time of writing - 32%. This compared to 42% in April 2020, 39% in June 2019 and 48% in 2017. One reason for the declining use of initial fees may be that AIM managers are operating close to more mainstream funds, where fees have also been dropping. A 2020 Morning Star survey - conducted before Covid-19 - found that fees had been dropping consistently since at least 2013, and 2020 was seeing some of the lowest fees on record. These fees are notably lower than the initial fees charged for private BR offers, which averaged 1.02% in May 2021. On top of this private BR offers charge investee companies an average 0.33%, in contrast to AIM BR offers where there is no opportunity to levy such fees. But, while AIM companies do not have to pay fees to AIM portfolio managers who acquire their shares, they will have already paid to list on AIM and will be required to pay annual AIM fees while listed. These costs, although cheaper than for those listing on the main markets, can be relatively significant to SMEs.
Initial Charges
Annual Management Charges
Despite a slight increase to annual management charges (AMC), there has been little movement over the past 3 years. The full range of AMC charges range from 0.75% to 2%, with the vast majority charging between 1% and 1.75%. This isn’t a huge difference in number, however it is important to remember that this is charged every year - so has the potential to add up over time. A longer term investment outlook can be expected when investing in AIM for BR, EIS or VCT purposes as qualification for BR, EIS and VCT requires minimum two, three,and five year holding periods respectively. Those time frames are likely to be longer given liquidity and exit considerations for the latter and the fact that BR-qualifying shares need to be held on death for the beneficiaries to claim the relief.
May 2021 0.47% 1.33% 0.36% 0.32% 0.04%
April 2020 0.64% 1.32% 0.38% 0.31% 0.02%
Total Initial Charge AMC Charged to Investor Initial Deal Fee Exit Deal Fee Annual Admin Charge
average charges
April 2020 0.64%
JUNE 2019 0.57%
May 2021 0.47%
All data is correct as of 21 May 2021, and has been obtained from the MICAP platform, unless otherwise stated. MICAP offers IFAs and other financial professionals a platform to conduct due diligence on tax advantaged AIM funds, of which there were 37 at the time of writing. The vast majority of these were business relief related. Due to the time of year, there were no open VCT offers, as well as a single EIS fund.
How do we use MICAP?
APRIL 2020 1.28%
May 2021 1.33%
JUNE 2019 1.31%
AMC
Market structure
CONSIDERATIONS FOR INVESTMENT / MARKET STRUCTURE
Target number of investees
The average target number of investee companies was 26.8. For pure growth funds, the target was 27, while growth and income funds targeted on average 26.5. The level of diversification will change throughout the year, as VCT tends to have a higher target compared to non-VCT funds. The average target diversification for growth funds in April 2020 was 26.05 - almost 1 company lower than the average target diversification for May 2021. It is possible that the increase in diversification is a defensive measure against the more volatile economy the world has been for the past year. It might also allow for a bit more flexibility - as the world has changed so rapidly as a result fo Covid-19, and continues to do so as we enter the recovery stage, targeting more companies would allow a manager to spread their bets slightly wider. It is also possible to overestimate the size of the difference. While the average has increased a bit, the most common target remains 25, with a minimum of 10, and maximum target of 43.
Compared to April 2020, the average minimum investment was up by £7,000, largely caused by a lack of VCT funds open in May 2021. Several of these have smaller minimum deposits of below £10,000, with the lowest historical amount just £2,000.
Minimum Investment
Average 26.8 27 26.5
Overall Growth Growth and Income
TARGET NO. OF INVESTEE COMPANIES, OPEN OFFERS
Mode 30 25 30
Min 10 10 20
Median 25 25 27.5
Max 43 43 35
open offers
Average £62,778
Mode £100,000
Min £15,000
Median £50,000
Max £200,000
Overall
Growth & Income 32.4%
Growth 67.6%
All open AIM BR offers from the MICAP review have either a growth or growth and income strategy, with about two thirds focussing purely on growth. The weighting here would likely change depending on what time of the year the review was done, however. VCTs, which generally raise nearer the start of the year will usually all be growth and income - meaning if the review was done during the VCT fundraising season, a higher proportion of funds would classify themselves as growth and income. Of course, the prospect of the tax-free dividends is a popular element of VCT investments and it drives VCT managers to search out those with regular income plays. Despite dividends/income being taxed when taken from BR-qualifying companies, the last few years have seen growing interest in income options in BR offers as a result of demand from older investors keen on ongoing supplements to their pensions. As a result, some BR managers may also look for AIM shares that generate regular income, although this may be at a lower level than that favoured by VCT managers. There is also a question of what ‘growth’ actually means. The AIM market is diverse - with small companies whose shares can rise and fall with incredible speed, all the way to huge multinational companies that are much more stable. Typically, AIM BR managers will be looking to invest in comparatively safe companies that should help avoid some of the volatility present in AIM, intending to invest in shares they consider good value, as opposed to speculating on more risky (but potentially faster growing in the short term) companies. Generally they target growth somewhere around the 4-8% mark. In contrast, an AIM EIS fund will, by definition, look to invest in younger companies, and might be looking to double or triple the investors capital in five years.
It is impressive that the number of growth and income funds has remained at a decent level. 2020 famously saw dividends take a severe hit, as companies sought to ensure they had enough cash flow to either survive, or to take advantage of an eventual recovery. According to Link Group’s AIM Dividend Monitor 2020, released in September last year, dividends fell by a third across AIM, with two fifths of AIM companies cancelling their dividend. With the UK economy now moving into ‘recovery’ mode, dividends should gradually recover over the coming years. According to Link Group, AIM dividends should reach their pre Covid-19 peak in 2022 or 2023.
Regardless, it is notable that not one fund focuses solely on capital preservation. Given the fact that BR is a tool to help legally shield money from IHT, AIM BR funds sometimes have a reputation for focussing on protecting wealth, as opposed to growing it. However this does not appear to be the full story. Instead, it seems BR managers look to carefully manage growth and in some cases pay income as well. There is a notable difference in how growth funds charge fees and how growth and income funds do. In general, funds which pay dividends charge a lower initial charge (roughly half), but then charge higher AMCs. Income is ideally payable every year and there is a premium on AMCs for it.
Average initial charge 0.54% 0.25%
Average AMC 1.26% 1.44
Growth Growth and Income
Market composition of open offers
AIM Options increase The importance of ESG in investment The UK Listing review
4. Considerations for Investment
AIM options increase
Industry Analysis /AIM options increase
ver since the 2008 crash, the AIM market has seen the number of companies listed on it gradually shrink, even as its overall market value rose. As companies generally have left AIM - whether that be due to an IPO/merger, a reverse takeover, delisting or to join the main FTSE market - there have not been enough new companies joining to replace them. As a result in 2020, there were less than half the number of companies on AIM compared to in 2008. The number of international companies in particular has seen a dramatic fall in that period - there were just 112 international companies at the end of 2020, compared to 347 at the end of 2007. At the same time, an increasing number of large companies have become happy to sit in AIM, growing larger and larger, lifting the total market value. For these companies, there are a number of reasons to remain - BR investment might provide a welcome additional source of capital, or they may prefer the reporting regime on AIM.
E
The initial reaction to Covid-19 was for these trends to accelerate. Between January and September, just 16 companies listed on AIM - only 1 of which was international. In the same time, 57 companies left AIM, including 10 international companies. However from Q4, an increasing number of companies joined AIM, while the rate of companies leaving the market slowed compared to the year before. As a result in Q1 2021, the number of companies on AIM actually increased (albeit by just three). It is possible that the reason for the bounce is that a number of companies held off from IPOing in 2020, as they opted to take a wait and see approach to wider economic trends. Over 2021, the British vaccine programme has helped dramatically reduce Covid-19 deaths, while the Brexit trade deal signed at the end of 2020 helped provide an element of economic certainty which had been lacking since 2016. A combination of the two may have led to a wave of companies listing. That said, 2020 saw 32 new companies join AIM, a notable increase on the record low of 23 joiners in 2019. Although 32 remained the second lowest year on record, the fact it was higher than 2019 suggests Covid-19 cannot be entirely to blame.
Winds of change?
As the AIM market matures, it may simply not be worth the effort required to move into the main FTSE market anymore. If the UK Listing Review’s recommendations are generally approved (see UK Listing Review Section), this may be even more the case. As a result, while the number of companies on AIM has seen a notable decline, the total market value has continued to grow. For BR managers, having these larger, and in theory more stable options available for BR investment is a good thing, as in theory this should mean there are more stable companies to invest in. That said, the smaller, innovative companies that make AIM their home still have the opportunity to catch the eye of VCT or EIS managers.
companies worth over £1 billion on AIM at the end of 2020
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The first three months of 2021 saw 15 new companies join AIM. One such company was Parsley Box. Speaking to finnCap, Parsley Box CEO Kevin Dorren said the pandemic gave his company a stress test over the business’s scalability, but didn’t accelerate plans for an ipo ‘massively.’ Another company which listed on AIM in 2021, management process automation provider ActiveOps didn’t directly mention the pandemic when it listed, however hinted the changing behaviour it caused may have helped it grow. It’s CEO Richard Jeffrey said: “The IPO provides us with access to a blue-chip investor base while enhancing our credibility as we seek to grow our enterprise customer base," He added that increasing regulation, automation and the changing dynamics of the workforce mean balancing customer service, efficiency and employee experience is more challenging than ever. In other words, while neither of these companies listed directly because of the pandemic, both had opportunities accelerated as a result. 2021 has been a generally positive time for new listings beyond AIM as well. According to the Financial Times, Q1 saw the strongest start to a year in dealmaking for four decades. Meanwhile the London Stock Exchange said it saw it’s best first quarter for listings in 15 years. Clearly as the world moves out of lockdown, companies are committing to action. With many expecting the economy to enter recovery mode and witness strong growth, for some, listing might be about raising capital to ensure they can take advantage. Speaking to the FTadviser, Romi Savova explained this was part of the reason she chose to take PensionBee public in April. This listing raised £55 million, £33 million of which will be spent on advertising and marketing to spur further growth. Although PensionBee is listed on the main market as opposed to AIM, the logic could apply to AIM companies as well.
Why companies are listing
Source: London Stock Exchange
The last two months have seen profit taking, following six months of strong recovery gains inspired by a successful Covid-19 vaccine launch and rollout.
- Dr Stuart Rollason, Puma
INDUSTRY ANALYSIS / The importance of ESG in investment
The importance of ESG in investment
O
While ESG investing is a positive step, it is not without its challenges. First among them is the concept of ‘greenwashing’ - that is to say inflating or creating a company's ESG credentials. This famously occurred in 2020 with AIM-listed online Fashion retailer BooHoo. It’s online business model hugely benefited from the Covid-19 Lockdown and in 2020, it’s share price performed extremely well as a result. Boohoo also received the second highest ranking for ESG from rating and index provider MSCI, and as a result a number of ESG focussed funds flocked to the stock market darling. But then in June, the Times revealed workers in Leicester were working without sufficient PPE for less than minimum wage to make clothes for BooHoo. In the resulting scandal, BooHoo shares almost halved. While there has been a recovery, they are yet to reach their pre scandal peak. While BooHoo has said it has reviewed its internal policies to stop such an event happening again, it nonetheless shows how hard it can be to ensure ESG ratings are accurate. A large part of the problem is that the fledgling ESG standards are disparate, and not always externally audited with the same vigour as a financial audit (if they are externally audited at all). For clients looking to invest in AIM companies, but who also wish to invest in line with ESG principles, it is therefore important to understand how any AIM investment manager involved decides where to invest. For example, are they signatories to the United Nations-supported Principles for Responsible Investment (PRI)?
ver recent years, investors and the wider population have become increasingly aware of the need to look beyond just the bottom line when it comes to investing. This has given rise to ‘Environmental, Social and Governance’ (ESG) style investment decisions. The recent Covid-19 pandemic has accelerated these trends - highlighting our vulnerability to natural disasters and climate change, while also bringing numerous examples of poor social and governance issues to the fore. This is being encouraged by Government action. In the US, re-enrolling the US into the Paris Agreement was among President Biden’’s first actions, and there are rumours he may implement some sort of mandatory ESG reporting in the future. In the UK, the Conservative Government has been just as proactive.
When Deliveroo listed on the London Stock Exchange, there were initial hopes it would lead to a wave of tech startups choosing to list in London. However as the time of the listing drew nearer, fears around how the company pays its deliverers (and how much it paid them) began to crystalise. With gig worker pay still under the spotlight, investors worried they would be betting on a company set to potentially spend the next several years fighting legal battles with its own staff. Shares fell from an initial listing price of £3.90 to £2.87 almost immediately, and have continued to fall since. All this came on the back of a year of bumper performance, as Lockdown led to an increasing number of people ordering food deliveries, while restaurants looked to the likes of deliveroo to help them fill this need. Although not listed on AIM, this helps show that a poor ESG rating can lead to investor worry, and in turn, poor share performance - even if a company is performing well.
How ESG concerns can affect performance: Deliveroo
In 2021, Boris Johnson committed the UK to reaching 78% emissions compared with 1990 levels by 2035 , and the UK has committed to net neutrality by 2050. At the same time, in the most recent budget, Chancellor Rishi Sunak announced millions of pounds would be made available for green initiatives, such as carbon capture and offshore wind farm technologies. All this resulted in ESG focussed funds performing well in 2020. In many cases, these funds outperformed the wider market last year. This helps highlight how the wider investment environment, in which AIM belongs, is becoming increasingly ESG friendly. For investments, which are designed to help one generation pass on their wealth to the next, an ESG philosophy makes sense: The environmental aspect of ESG should mean the planet they inherit is worth living in, while the social and governance elements ought to benefit longer term performance. At the moment, there is no uniform approach to ESG among AIM BR, EIS or VCT funds, and investment criteria can vary quite dramatically. Some will not take into account ESG considerations when choosing investments. Some will avoid sectors that are not ESG friendly - such as mining and fossil fuels - because they do not like the financial fundamentals of the sector, and want to avoid volatility. Then there are also funds which actively consider the ESG credentials of potential investments before any investment is made. And within this final group, different funds may have used different methods of due diligence or standards when making their ESG based decisions, and therefore see different results.
Challenges
what are the PRI?
Other questions to ask include, do they exclude any sectors from their portfolio (for example oil and gas extraction), or if they use a third party to help with their third party ESG assessments, and if so who? At the moment, ESG investing is still developing at a rapid pace, and therefore for clients who wish to invest along ESG lines, it is important to regularly speak with any panels you work with, to ensure they continue to meet the standards you expect. It seems only a matter of time before specific ESG related disclosure regulations are brought to AIM. Earlier in 2021, the FCA noted the Department for Business, Energy & Industrial Strategy has announced plans to consult on climate related disclosure obligations for certain UK registered companies this year, and this may well include companies listed on AIM. For it’s part, the London Stock Exchange put out ESG related guidance to its companies last year, outlining why it thinks ESG is so important.
Principle 1: We will incorporate ESG issues into investment analysis and decision-making processes. Principle 2: We will be active owners and incorporate ESG issues into our ownership policies and practices. Principle 3: We will seek appropriate disclosure on ESG issues by the entities in which we invest. Principle 4: We will promote acceptance and implementation of the Principles within the investment industry. Principle 5: We will work together to enhance our effectiveness in implementing the Principles. Principle 6: We will each report on our activities and progress towards implementing the Principles.
Investor appetite is increasingly focussed on ESG and sustainability considerations, and we take encouragement from the companies listed on AIM that are proactively engaging with this interest
- Hugo Wood, Sarasin
The UK listing review
INDUSTRY ANALYSIS / The UK listing review
t is an open secret that the last few years have been a tough time for the London Stock Exchange's main markets. Although investors have been able to earn good returns, a combination of factors have seen it’s global position challenged. The FTSE 100 especially is disproportionately weighted towards ‘old world’ companies (for example old banks and oil companies), while the big growth has been in sectors underrepresented on the FTSE, such as technology and life sciences. In 2020, there was a period of time where Apple was worth more than the entire FTSE 100 combined, for example. The UK is actually among the global leaders in fintech and life science startups, and they are relatively well represented in the AIM market. The issue LSE has is once these companies grow to scale, many either list to a foreign exchange or are acquired by a foreign buyer. At the same time, Brexit has seen European competitors promote themselves as the new gateway to Europe, and Dutch, French and German exchanges in particular have looked to attract businesses this way. Again, this is not such a problem for AIM, where the majority of companies are UK based, and do the majority of their business in the UK. Nonetheless it remains a challenge for the wider UK economy.
One recommendation which could have a direct impact on the AIM market would be to broaden the FCA’s statutory objective to include either growth or competitiveness. Such a move would bring the FCA more inline with European and other international regulators, and allow it to take this into account when considering markets. Such a move could have dramatic effects far beyond the premium UK listing market. For example it could mean (depending on its implementation) that the FCA would need to take into account either growth or competitiveness when considering regulations outside of the FTSE.
A new FCA objective
The risk for AIM- focussed BR managers is if a more attractive FTSE leads to some of the larger, more mature, companies on AIM moving into the main or premium markets. There are a number of companies worth over £1 billion on AIM, and some of these will have received funding from BR managers. That said, in the wider context, a more healthy UK listing eco system will likely be a net positive for BR managers. It is no secret that the number of international AIM companies has dramatically shrunk over the past decade or so. Increasing the attraction of London in general might see AIM benefit aswell, with younger companies listing on AIM with a view to potentially joining the FTSE down the line. A growth/competitiveness orientated FCA would also benefit the AIM market. After all, a regulator that takes into account the impact on growth into its regulatory decisions seems like a better fit for the world's leading growth market. Finally, the fact the UK government is taking a serious look at the UK listing market is a sign that it is taking these stock exchanges seriously, and should encourage investors that UK stock exchanges, including AIM, will continue to receive positive government support in the future.
The wider future of the UK market
With an eye on keeping the UK (and specifically London) relevant, the Government launched a review into UK listings at the end of 2020, which released it’s recommendations in March.Although it’s recommendations were focused on the main market, the review may influence AIM investments through increasing the appeal of the UK listings market generally. Also, potentially making the leap from AIM to the FTSE a less arduous one could lead to some of the larger AIM companies moving up. Overall, the Listing Review pushes for a simplification of the UK’s listings rules. For example: The dual class share structure is relatively common internationally, and is allowed in AIM. It is believed to be attractive to high growth tech companies, where a visionary leader will want to keep creative control, even though they may wish to raise capital through an IPO. Currently, if such a company existed on AIM, moving to the premium market would be less appealing as a result. Allowing it on the main market would make such a leap less difficult.
In line with the great majority of submissions we have received –and recognising the need to make sure we attract companies in vital innovative growth sectors such as tech and life sciences –we do recommend that, with sensible safeguards, rules should be changed to allow dual class share structures in the premium listing segment. We also recommend that the free float requirements should be made more flexible for all listings. But we are also of the view that it makes sense in parallel to provide more choice for companies by repositioning the current standard listing segment and promoting it far more effectively.
Dual class share structures can be a controversial topic. They involve distinct share classes (Class A share, Class B Share and so on), which will have distinct voting and potentially dividend rights. They allow certain investors (or often founders) to sell an increased number of shares without ceding control. In 2014, the FCA clarified it’s position on this topic for premium listings in the UK market: • Premium Listing Principle 3: All equity shares in a class that has been admitted to premium listing must carry an equal number of votes on any shareholder vote. • Premium Listing Principle 4: Where a listed company has more than one class of securities admitted to premium listing, the aggregate voting rights of the securities in each class should be broadly proportionate to the relative interests of those classes in the equity of the listed These restrictions do not apply to AIM. Dual class share structures are contentious. They are attractive to founders who want to raise capital without losing control of their company. On the other hand a number of institutional investors have complained that this has allowed management or founders to entrench their position at the expense of other investors, and cause conflict between the different class shareholders.
knowledge intensive companies
Dual class share structure
The performance of many of the companies listed, together with a good string of new entrants, has put AIM at the forefront of the UK’s economic recovery post-COVID. Smaller companies are still largely under-researched and hidden gems will continue to emerge. Bevigilant, be alert, and good returns can be found.
-Neil Blankstone, Blankstone Sington
5. Managers in Focus
Blackfinch Blankstone Close Brothers Puma Investments Sarasin TIME AIM Solutions comparison table
managers in FOCUS / blackfinch
manager video content
go to website
www.blackfinch.com 01452 717070 enquiries@blackfinch.com
dominique butters
Executive Business Development Manager
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manager content
managers in FOCUS / CLOSE BROTHERS
managers in FOCUS /PUMA INVESTMENTS
pumainvestments.co.uk 020 7408 4070 advisersupport@pumainvestments.co.uk
Dr Stuart Rollason
Investment Director
managers IN FOCUS / AIM SOLUTIONS COMPARISON TABLE
Manager name Year founded AUM (In total) AUM (on AIM) Description of Offer Launch Date Tax wrapper or relieF No. of holdings Target Fundraise Investment Objective Target Annual Return (where stated) Liquidity (days to exit) Income (Y/N) Minimum Investment Minimum Increment Initial Fee AMC Other fees
TIME Investments 2011 £4 billion (TIME group) £60 million (AIM) TIME:AIM provides investors with exposure to the AIM market through a diversified portfolio of BR qualifying companies. TIME:AIM follows a disciplined, data-driven process to select high quality companies that have the potential to deliver attractive long-term returns. TIME:AIM can be held within an ISA or non-ISA wrapper. November 2016 ISA and BR 30 N/A Long-term growth N/A Withdrawals processed monthly; sales proceeds sent to investors within 14 days of selling shares. No £25,000 standard applications £15,000 ISA applications £15,000 1% + VAT standard applications 0% ISA applications 0.8% + VAT 1% Dealing Fee 0.32% Custodian Fee
29
Covid-19: a Changed Context for BR BR Developments AIM Business Relief Budget News Thought Leadership - Downing Thought Leadersnhip - TIME What the Managers Say
Market Composition Fees and Charges ESG in BR The Cost of BR
3. considerations for investment
Carbon Neutral Economy offers Opportunity Spring Budget Driving Green Economy Reframing Excepted Cash Assets
4. industry analysis
Beringea Blackfinch Downing Octopus Seneca TIME BR Solutions Comparison
Upcoming IHT Changes Moving on from Covid-19: What's Next What the Managers Say
Learning Objectives CPD and Feedback About Intelligent Partnership Disclaimer
Manager name YEAR FOUNDED AUM (In total) AUM (on AIM) Description of Offer Launch Date Tax wrapper or relief No. of holdings Target Fundraise Investment Objective Target Annual Return (where stated) Liquidity (days to exit) Income (Y/N) Minimum Investment Minimum Increment Initial Fee AMC Other fees
Close Brothers Asset Management 1878 £12.6bn at 31/7/2021 / £342.9m at 30/4/2021 The Close Inheritance Tax Service (CITS) is a specialist, discretionary investment management service designed to provide accelerated relief from IHT by investing in Business Relief (BR) qualifying shares quoted on the Alternative Investment Market (AIM) and the Aquis Stock Exchange (AQSE). March 2001 Eligible for ISA investment 25-35 N/A - evergreen 1. To achieve a beneficial tax status by capitalising on Business Property Relief (BPR)* 2. To preserve capital** and achieve growth over the long-term within the context of BPR 3. To diversify risk N/A Target under 10 days for withdrawals of £25,000 and below N £50,000 £50,000 £250 + VAT 1.25% + VAT of portfolio value 1% dealing fee on the value of each transaction
Sarasin & Partners AIM Portfolio Service 1983 £18.5bn £100m The Sarasin & Partners AIM Service provides investors with a discretionary portfolio of 20-30 UK smaller companies listed on AIM. Companies are selected for their strong growth and ESG characteristics and, under current legislation, are expected to qualify for Business Relief (BR) and thus be exempt from Inheritance Tax. January 2007 ISA and non-ISA eligible and expected to qualify for Business Relief 20-30 N/A - evergreen Long-term capital growth N/A Daily liquidity Yes £200,000 £100,000 0.0% 1.5% + VAT (assuming adviser acts agent-as-client) 0.0%
Blankstone Sington Limited 1976 AUM Total £472mn AUM on AIM via IHT Service £43.5mn as at 31st May 2021 Blankstone Sington’s award-winning Inheritance Tax Portfolio comprises companies traded on AIM with the objective of securing Business Relief (BR) against inheritance tax by investing in a range of qualifying companies. 2010 BR - available to be undertaken in ISA 25-40 £150mn soft close Focussed on capital preservation, blended between growth and value, whilst still offering an Income return of between 1.5-3% N/A Sale of investments completed and settled within 48 hours Y - if required Direct - £40k Advised £20k £5,000 NIL Direct 1.25% first £500k, 0.75% Balance Advised 1% first £500k 0.75% Balance Annual Administration Charge 0.25%, minimum £200 maximum £1200
* Both AMC and Other Fees are subject to VAT
Puma Investments 1985 (Shore Capital, parent company of Puma) £1.4bn £60.34m A discretionary portfolio service that seeks to deliver long-term growth and mitigate IHT by investing in a carefully selected portfolio of AIM shares. The Service is available in ISAs via either a new or existing account and is also accessible via the Ascentric, Fidelity, Standard Life and Transact wrap platforms. July 2014 ISA and non-ISA eligible, and expected to qualify for Business Relief 25 - 35 N/A Investing in quality companies with strong margins, good returns and a track record of cash generation. Portfolio companies are selected using strict criteria. N/A Immediate, subject to ability to realise investments. Yes - via regular withdrawals. £20,000 Minimum top-up = £10,000 1% 1.25% Dealing fee: 1%.
Blackfinch Adapt AIM Portfolios 1992, 2013 as Blackfinch Investments Limited. £535.7m / £44.0m at 10.05.2021 The award-winning Adapt AIM Portfolios invest in fast-growing firms listed on the Alternative Investment Market (AIM). We only invest where we believe stocks qualify for Business Relief (BR). BR can deliver Inheritance Tax (IHT) relief after just two years (and if held at the time of death). AIM brings return potential and the ability to hold in an AIM ISA. The portfolios offer growth and income options. We manage them in partnership with Chelverton Asset Management, a smaller companies specialist with a proven track record. July 2016 Clients have the choice to hold their investment in an ISA wrapper The current buy list contains 28 companies for the Growth Portfolio and 21 for the Income Portfolio. N/A Income and growth (to qualify for up to 100% Business Relief) We use RepRisk to screen for ESG risk factors. RepRisk screens over 500k documents each day and can map ESG factors to the UN SDG’s which Blackfinch aligns with as part of it’s ESG policies N/A Under normal market conditions we would expect them to be completed within two weeks. 01/04/2020 - 31/03/2021 Dividend Yields: Growth = 0.9% Income = 1.8% The 2020-21 year saw dividends decrease as companies weathered the COVID-19 economic downturn. Historically performance has been between 1.5%-1.8% for the Growth and between 3.8%-4.8% for the Income portfolio. £15,000 £5,000 0% entry fee for applications 1.5% + VAT per annum on the value of all portfolios (which includes Chelverton fee of 0.5%+VAT) Dealing Fee of up to 1% on the value of the transaction. Dealing fees may vary depending on the platform used to invest or the value of each trade.
AIM PERFORMANCE Reform suspended 10% RULE REGULATORY UPDATE BENEFITS of an AIM PORTFOLIO ALTERNATIVE InVESTMENT MARKET WAKING UP TO ESG 2020 - GROWTH BECAME VALUE TAX-EFFICIENCY & INVESTMENTS WHAT THE MANAGERS SAY
Aim options IMPORTANCE THE UK LISTING REVIEW
BLACKFINCH BLANKSTONE CLOSE BROTHERs PUMA SARASIN TIME AIM COMPARISON TABLE
Life After Covid-19 Potential Changes to IHT? What the Managers Say?
*A company that qualifies for BR at the time of investment may cease to qualify for reasons outside our control at a later date, which means any tax benefits will be lost until the capital is reinvested in BR qualifying company. **This is not a capital protection service and your client’s capital is at risk.
Manager name YEAR FOUNDED AUM (In total) AUM (on AIM) Description of Offer Launch Date Tax wrapper or relief No. of holdings Target Fundraise Investment Objective Target Annual Return (where stated) Liquiity (days to exit) Income (Y/N) Minimum Investment Minimum Increment Initial Fee AMC Other fees
6. What's on the Horizon?
Life after Covid-19 Potential Changes to IHT? What the managers say
WHAT'S ON THE HORIZON LIFE AFTER COVID-19
LIFE AFTER COVID-19
he recovery from Covid-19 has so far been extremely uneven. Certain sectors - notably tech, e-commerce, and biotech and pharma saw a number of companies not only swiftly recover from their initial Covid-19 falls, but end 2020 at record highs. For other sectors - such as hospitality and high street shops - the recovery is still ongoing. Some of these brands have been unable to take the stress of the past year, and folded or were sold to another brand. In general, 2020, and Q1 2021 saw growth shares dominate at the expense of value and income shares. Low interest rates and low inflation both generally benefit growth shares, while certain growth shares (such as Tesla) became almost a brand in themselves, attracting investors chasing rocketing growth. In contrast, for income shares, there was a different story. According to Link Group, dividends fell 44% to £61.9bn - the lowest number since 2011. Link Group says UK dividends may not recover until 2025. With the threat of Covid-19 seemingly receding on the back of a successful vaccine programme, the question becomes what next? In it’s May Quarterly Update, the Bank of England (BoE) said it intends to keep interest rates at the record low 0.1% in order to support households and businesses. Continued low interest rates will allow institutions to borrow money and invest more, increasing productivity. Significantly, however, it predicted inflation would increase to above it’s 2% target towards the end of 2021. Increasing inflation combined with a dramatically different macro economic environment to 2020 could see different shares perform better or worse, compared to 2020.
With the threat of Covid-19 receding, economists are increasingly confident in an improving economic situation. Recently, the Bank of England revised up it’s forecasts, and now predicts the UK economy will grow 7.25% this year - the highest recorded growth since WW2! There are still unknowns, however. Of course, Covid-19 remains a huge threat. While the virus appears contained at the moment, a new strain resistant to current vaccines could plunge the world economy back into darkness. Another question that remains is how consumers will react to the post pandemic world. Many will have increased their savings during the lockdown. Will they invest that into stocks and shares, or crypto, will they spend it, and help stimulate the economy, or will they leave it in a cash ISA for use on a rainy day? It is too early to tell for sure one way or another.
Wider economic recovery
UK SMEs are often considered the engine room of economic growth, AIM listed companies offer the opportunity to capitalise on this growth and if shares are held within an ISA this growth is tax free.
- Chris Cox, TIME Investments
WHAT'S ON THE HORIZON / Potential changes to IHT?
Potential changes to IHT?
During 2021, IHT bands have been frozen until 2026, and the Government has made a number of administrative easements, however wider changes may be yet to come. When discussing the Office for Tax Simplification (OTS)’s first report on IHT, from 2018, the Government noted it planned to look at the second 2019 report in the future. Therefore IFAs should be aware of some of the larger changes the report proposed and to which Government focus has returned.
t is important to note that the OTS acknowledged the important role BR plays in directing investment into the AIM market. However it also questioned whether third party investment into AIM shares necessarily fell in line with BR’s original objective of allowing families to pass on their business to the next generation without IHT, leading to an inevitable sale of the business. However, possibly due to the statements the Government had recently made about the important role BR plays in AIM, it did not make any further recommendations on these lines. It did, however, suggest making changes to BR’s rules around eligible activies. Under current rules, a business must be ‘wholly or mainly’ carrying out 'activities' that qualify for BR. ‘Wholly or mainly’ is classed at over 50% of a company’s 'activities', assets and profits. There is a similar rule for gift holdover and 'Business Asset Disposal Relief (BADR) (formerly entrepreneur's relief) with regards to capital gains tax, however the ratio of allowable to non allowable assets is notably different. Where a business is given away as a gift or sold to a third party, gift holdover relief or BADR may apply. In order to qualify, it is not allowed to conduct ‘substantial’ non- trading activity. HMRC guidelines suggest an 80:20 split in this regard - in other words a business may only have 20% of its business in non-qualifying activities. The OTS said this could have a distorting effect on the market, and therefore suggests considering bringing BR in line with gift holdover relief. Since the report was written, the amount of BADR an individual can claim has been massively reduced, however the rules applying with regards to the 80:20 split have remained the same. If the government were to reduce the amount of non BR qualifying business a company was allowed to undertake from 50% to 20%, this would inevitably reduce the number of AIM businesses that qualify for BR, reducing the pool of options open to managers.
Currently furnished holiday lets do not qualify for BR. Current guidance from HMRC says: “furnished holiday lets will in general not qualify for BPR. The income derived from such businesses will largely consist of rent in return for the occupation of property. There may however be cases where the level of additional services provided is so high that the activity can be considered as not an investment, and each case needs to be treated on its own facts." In other words, in general, a furnished holiday let counts as an investment (and therefore does not qualify). However if the level of additional service is high enough, it may be classed as a trade. As this leaves a lot of room for interpretation, it has fallen to case law traditionally to decide on what level of additional services would qualify. As this is a grey area, holiday letting companies are a more risky proposition for BR managers, despite them providing a stable yield, ideal for BR investors. This is also inconsistent with income tax and capital gains reliefs, where holiday let companies are more likely to be treated as trading rather than investment companies. Noting the difficulties and inconsistencies present, the OTS suggested reviewing guidance on furnished holiday lets, and aligning their treatment for BR purposes with other tax reliefs. There are currently approximately 80 travel and leisure companies on AIM, and a further 90 real estate investment services or trusts. Greater clarity over whether any furnished holiday lets belonging to these companies would qualify for BR or count as excepted assets would provide BR managers with greater confidence in their investment decisions, and potentially open up new opportunities for them. This could be especially important if the Government was to reduce the amount of excepted assets allowed.
The importance of BR to AIM
Changes to holiday let rules
One area the Government may well look at in the future is the relationship between IHT and Capital Gains Tax (CGT). One of the overriding themes of the OTS report was that inconsistency between the two taxes, and their respective reliefs, was having a distortive effect on the market. For example, if a client owns and runs a company that qualifies for BR, but wishes to sell it and retire, he may be liable to a sizable CGT bill at the point of sale, and his next of kin face an IHT bill (assuming the proceeds aren’t invested into another BR qualifying investment). However if he was to keep hold of the business, and then pass it on to his children at death, they could then sell the business - avoiding any CGT and IHT in the process. Key to this imbalance is the Capital Gains Uplift: if a BR qualifying asset that was held for two years is held at time of death, the next of kin is judged to inherit it at current market value - in other words prior capital gains disappear.
Interactions with Capital Gains
Sally invests £100,000 in an AIM BR Fund when she is 60. By the time she reaches 70, those shares are worth £250,000, having more than doubled in value over the decade. However, at this point she passes away, leaving the shares to her only child. As this was a BR qualifying fund, no IHT is due on it, and the capital gains are erased at death. The child inherits the entire holding, tax free.
Case Study
The distorting effect can see asset owners hold onto their assets for longer than they otherwise would, rather than face a CGT bill (and potentially leave their children facing additional IHT to pay). To combat this, the OTS recommended a ‘no gain, no loss’ policy on death, that would see shares passed on at a historic base cost, where an IHT exemption applies.
"Where a relief or exemption from Inheritance Tax applies, the government should consider removing the capital gains uplift and instead provide that the recipient is treated as acquiring the assets at the historic base cost of the person who has died."
OTS recommendation: ‘no gain, no loss’
The OTS mentioned a few complications this would cause: What would happen when a proportion of an estate is passed on to a spouse or a civil partner without individual assets being identified? Also, consideration would need to be given where an asset is transferred to two beneficiaries, one of whom is exempt and the other is not. Finally, it would add an additional administrative burden on people, as they would need to keep records of the values of parts of the estate at which they acquired them. Despite these challenges, the OTS has since doubled down on this idea. In its 2020 review of CGT, it added additional recommendations: • In addition to the original recommendation, the government should consider removing the capital gains uplift on death more widely, and instead provide that the person inheriting the asset is treated as acquiring the assets at the historic base cost of the person who has died. • If government does remove the capital gains uplift on death more widely, it should: • consider a rebasing of all assets, perhaps to the year 2000 • consider extending Gift Holdover Relief to a broader range of assets Interestingly, in the CGT review, the OTS noted the idea of no gain, no loss was already proving unpopular with advisers, and it is easy to see why. Even with the additional clarifications, it remains a significantly more complicated system than currently in place, something the OTS acknowledges (despite its objective of ‘tax simplification’). If the government chose to follow the no gain, no loss policy, it would likely have a negative effect on BR, as well as the overall AIM market. Investors may be left to choose between taking an immediate IHT hit at the time of inheritance, or a CGT bill further down the road. As the future is unpredictable, this would add uncertainty at what would already be a difficult time for benefactors and beneficiaries. As the OTS acknowledges, BR provides an important funding incentive to AIM-quoted companies (as well as unlisted SMEs). Such a move may well result in BR products losing some of their appeal, and funding moving to theoretically less risky investments.
Assets (including cash) within a company will be considered “excepted assets” and will not qualify for BR unless they are either: used wholly or mainly by the business concerned throughout the two years preceding the transfer to the beneficiary; or required at the time of the transfer for future use for the purposes of the business. However, unlike the 50% condition for the business’s activities, relief is still granted on the remainder of the business’s assets. Simply holding cash in reserve to guard against a downturn is not considered a specific commercial justification.
Excepted assets in Business Relief
Have you had to change your interpretation of what qualified as a good AIM investment during the various waves of Covid-19?
What we have learned through the pandemic is that companies with strong balance sheets and experienced management are better positioned to adapt their business to weather the storm. Our investment process looks for the above qualities, and since the pandemic started, investee companies have performed resiliently, with no solvency issues. Our investment process therefore remains unchanged.
With AIM shares currently trading at such high levels, does this make finding value challenging?
With the buy and hold strategy our Adapt AIM portfolios follow, short-term valuation changes have less of an impact on investment decisions than, for example, an active, short-term alpha-seeking investment manager. While we are vigilant to overpricing, we believe high quality companies still offer good value over the medium and long term.
What are your hopes and expectations for AIM for the rest of the year?
Over the remainder of the year, we expect the easing of lockdown to drive natural improvement in the economy. Companies that have been prudent with cash throughout the pandemic may be in a position to deploy funds in a variety of ways, including bolt-on acquisitions and remunerating shareholders through dividends.
Lawrence Campin
Assistant Investment Manager Blackfinch
No, our investment philosophy has remained broadly unchanged as we think it is clear, conservative and logical. Following the Federal Reserve's decision to move to average interest rate targeting and the likelihood of an extended low interest rate environment in the UK, we lowered the discount rate in our models.
As we have seen such a divergent market, we are still finding new opportunities that meet our quality criteria at reasonable valuations, although they are getting a little scarcer. What has been evident is the pickup in companies looking to float on AIM and businesses raising cash for expansion – giving us the chance to deploy capital at more attractive valuations.
We have had a great start to the year, and looking across the portfolio holdings we still see a good amount of upside. I would not be surprised to see a temporary sell off as the inflation debate rumbles on, but expect that upward pressure on earnings estimates will herald a long overdue return to favour for UK equities.
have you had to change your interpretation of what qualified as a good AIM investment during the various waves of Covid-19?
A benefit of our thematic investment process is that it directs us towards long term growth opportunities, often disruptive in nature, rather than more mature cash harvest business models. Our process remains the same as, fortunately, many of these companies were able to survive and even flourish in spite of the global pandemic, seeing their opportunities grow and accelerate.
AIM shares have performed very strongly since their lows in April 2020, driven by the large number of disruptive growth companies that have maintained or strengthened their proposition during the pandemic. There are lofty valuations in the market, but with scarce returns available elsewhere and the prospect of large earnings progression in the next 12 months, these can still represent relative value.
We hope that AIM and the wider market experience a period of normalisation as the world recovers from the pandemic. Bouts of volatility will undoubtedly be a feature as the market digests shifting inflation expectations and treasury yields, but we expect underlying progression in the fundamentals of each company in our portfolio.
WHAT'S ON THE HORIZON / WHAT THE MANAGERS SAY
There have been no major changes to our investment process or how we define the type of company we seek to invest in. We continue to invest in high quality companies that are large, typically dividend paying, are profitable and are valued sensibly. We have however made some exceptions and continued to own companies that don’t necessarily meet all of our criteria due to the exceptional and extreme circumstances some sectors have faced in the past 12 months or so.
Financial markets globally are trading at historically high levels and the AIM market is no exception. Our investment process, whilst simple and transparent, is also flexible and can evolve as fundamentals and dynamics of the market change so we have not found it challenging so far in holding well diversified portfolios of 30 high quality, business relief qualifying AIM companies for clients.
We continue to see a rotation away from the sectors that performed well during the lockdowns towards those that struggled and are more fundamentally linked to the gradual reopening of the economy for the remainder of the year. Should this continue, we expect our portfolios to continue their recent outperformance of the market.
Investment Director Puma AIM Inheritance Tax Services
No, basic fundamental analysis should point to the better quality companies guided by good management teams. Strong performers in the lockdown confirmed the earnings quality and strategic acumen of certain management teams. Nevertheless, credit is due also to many management teams that have had to steer businesses significantly impacted by the unprecedented challenges presented by Covid.
The AIM market has been on a strong recovery run, but has given up some of those gains over the last two months. Whilst many AIM companies have participated in this rally, many others have not - or not to the extent that places it in overvalued territory, in my view. There are opportunities to invest.
My hope is that AIM continues to be a market that enables small companies to grow. Some of the most successful smaller companies have developed partly by organic growth and partly through acquisition. AIM provides an environment that allows smaller companies to access capital supported by long-term shareholders. I expect this support to continue given the impressive way management teams have steered their companies through extremely challenging times.
Visibility of earnings and strong cash flow has remained paramount as one of our key criteria. We believe that dividend or near dividend paying - with room for double digit growth - often shows strength of cash flow.
Continued uncertainty in particular sectors and a rotational shift away from Growth to Value has led for a re-rating on many companies. Those that have demonstrated a capacity to adapt will continue to find favour. Smaller companies also remain under researched, with hidden gems continuing to emerge.
In the short to medium term, we hope that recent IPO valuations are realistic and that quality new issues continue to emerge. In the medium to long term we also hope that the government recognises the enormous contribution the entrepreneurs and companies listed on AIM make to UK PLC, and support them accordingly.
7. Further learning
Learning objectives CPD and Feedback About Intelligent Partnership Disclaimer
learning objectives
further learning / learning objectives
HOW DID YOU DO?
Covered in section 2, AIM Performance during Covid-19, FCA looks to reform suspended 10% drop rule, Regulatory update
Outline the impact of Covid-19 on AIM
Identify the main developments and news in the AIM market.
Covered in section 2, AIM Performance during Covid-19, FCA looks to reform suspended 10% drop rule, Regulatory update, What the managers say and in section 4, AIM options increase
Evaluate the key fees and charges applied by AIM BR managers
Covered in section 3, Fees and Charges
Describe the growing importance of ESG on the AIM market
Covered in 4, The importance of ESG in investment
Define some of the key events likely to impact AIM in the near future
Covered in section 6, Life after Covid-19, Potential changes to IHT, What the managers say
Benchmark products and providers in the market against one another
Covered in Section 5
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CPD and feedback
further learning / cpd and feedback
Intelligent Partnership has achieved accredited status from the CII and PFS. Members of these professional organisations represent the majority of the insurance, investment and financial services industry.
R
eaders of the AIM Quarterly Update can claim up to two structured CPD hours towards their CII or PFS member CPD scheme for the time spent reading this Update (excluding breaks). The review process included an assessment of the technical accuracy and quality of the material against CPD Accreditation standards. Achieving the recognised industry standard afforded by these organisations for this Update, and our training, demonstrates our commitment to delivering only balanced, informative and high quality content to the financial services and investment community. In order to obtain CPD and meet accreditation standards, readers must complete a short questionnaire and provide feedback on the report. This includes 10 multiple choice questions to demonstrate learning and a feedback form to assist in the compilation and improvement of future reports. To claim your CPD please visit: intelligent-partnership.com/cpd
Intelligent Partnership actively welcomes feedback, thoughts and comments to help shape the development of these Quarterly Industry Updates. Greater participation, transparency and fuller disclosure from industry participants should help foster best practice and drive out poor practice. To give your feedback please email: publications@intelligent-partnership.com
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This publication is not included in the CLA Licence so you must not copy any portion of it without the permission of the publisher. All rights reserved. No parts of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means including electronic, mechanical, photocopy, recording or otherwise, without written permission of the publisher. This publication contains general information only and the contributors are not, by means of this publication, rendering accounting, business, financial, investment, legal, tax or other professional advice or services. This publication is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified professional adviser. Neither the contributors, their firms, affiliates nor related entities shall be responsible for any loss sustained by any person who relies on this publication. The views and opinions expressed are solely those of the authors and need not reflect those of their employing institutions. Although every reasonable effort has been made to ensure the accuracy of this publication, the publisher accepts no responsibility for any errors or omissions within this publication or for any expense or other loss alleged to have arisen in any way in connection with a reader’s use of this publication. This publication is based on the authors’ understanding of the structure of the arrangements detailed, the current tax legislation and HM Revenue & Customs practice as at June 2021 which could change in the future. It is not an offer to sell, or a solicitation of an offer to buy, the instruments described in this document. This material is not intended to constitute legal or tax advice and we recommend that prospective investors consult their own suitably qualified professional advisers concerning the possible tax consequences of purchasing, holding, selling or otherwise disposing of AIM quoted shares. Intelligent Partnership is not authorised and regulated by the Financial Conduct Authority and does not give advice, information or promote itself to individual retail investors. It is the responsibility of readers to satisfy themselves as to whether any arrangement contemplated is suitable for recommendation to their clients. Tax treatment depends on an investor’s individual circumstances and may be subject to change. Certain investments carry a higher degree of risk than others and are, therefore, unsuitable for some investors.
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