In this article, it is my pleasure to announce the publication of the inaugural edition of MJ Hudson’s AIM IHT Spotlight Report. In order to put the report together, MJ Hudson conducted a comprehensive outreach programme to all identifiable AIM IHT Investment Managers. Although a small number did not provide the required data, we are satisfied that the list of participants provides an excellent representation of the market, as a whole.
We are excited to compile this information in one place, for the first time, and hope that this yearly release will prove valuable for investors.
Without giving too much away from the full Spotlight Report, below are some of the key highlights, but please do download the complete report, for the full picture.
The AIM All-Share Index has made a recovery from the lows seen at the end of December 2018, however, it is still well below the highs seen at the end of September, in the same year. And so it is notable that responses to the survey showed most managers cautious in their short-term focus. More specifically, it was noted that, as the vast majority of AIM listed companies are UK-centric, ongoing Brexit negotiations remain front and centre. Although it has been acknowledged that those AIM companies with operations abroad will benefit from a weaker Sterling, this appears to have been outweighed by the lack of clarity with regards to the UK’s future relationship with the European Union.
That being said, the vast majority of managers pointed to more favourable valuations, following the widespread de-rating seen across many AIM-listed companies in the last months of 2018. As a result, those managers with a bottom-up approach to stock picking, and those managers who place a focus on strong company fundamentals, see plenty of buying opportunities in the market. Added to the potential for a continuation of supportive monetary policy, not only from the Bank of England but from other major central banks, some managers are of the belief that AIM will find some downside support, even in the absence of any significant upside.
Current market activity aside, it is interesting to note that a number of managers have pointed to the increasing maturity of the AIM, with both the size and quality of investee companies continually improving. According to data from the London Stock Exchange, in March 2019, the largest 50 companies had an average market cap of just over £950 million. Contrast that with just over £250 million for the same statistic, 10 years ago, and it is apparent that AIM is indeed starting to mature. This, according to a number of respondents, provides a good opportunity for AIM managers to invest in better quality companies going forward, and some managers expect the composition of their portfolios to increasingly comprise good-quality long-term investments.
Although this article gives just a brief overview of the report, and I would encourage subscribers to download the report in full for further insights, in summary, many managers expect to see a period of ongoing volatility in the short term. However, the Q4 2018 sell-off, combined with an increasingly mature AIM, will provide a good opportunity for skilled stock-pickers, and most managers appear to be quietly optimistic of AIM’s prospects once the current headwinds pass. As more investors are considering an AIM IHT provider when considering a Business Relief solution, it is important to realise that various managers have traversed the markets with different levels of success. In our role as independent due diligence providers on the wide variety of market providers, we recognise the importance of evaluating managers on an absolute basis, according to a rigorous methodology, but also in helping investors identify the key differentiators between the various managers.