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AIM market reaches 21 but still waiting to come of age

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The AIM market is now 21 years old, yet the FTSE AIM index still stands 30% below its starting level.

Laith Khalaf, Senior Analyst, Hargreaves Lansdown, says: ‘The AIM market may be 21 years old, but most of the companies listed on it are still pretty immature. It’s a market to go fishing in with a line and pole, rather than a great big net.
 
“The attraction of investing in smaller companies is plain to see from some of the success stories on the AIM market, but unfortunately there have been plenty of flops too.
 
“AIM shares have become more popular with private investors in recent years, partly as a result of them being allowed within ISAs, and the generous inheritance tax treatment. Successes like ASOS and Domino’s Pizza have also raised the profile of the market.
 
“However AIM is a market suited to investors who are sophisticated, brave and patient. Anyone who wants to gain exposure to smaller companies, but doesn’t have the expertise to pick stocks, should consider investing via a fund, where a professional investment manager picks a portfolio for you. This is an area where investment managers can really use their research resources to bear fruit, because the companies on AIM aren’t subject to the same level of global analysis as the big blue chips on the UK market.
 
“The AIM market was launched on 19 June 1995, and celebrated its 21st anniversary yesterday.
 
“The FTSE AIM index was launched in January 1996 (6 months after the market opened), but the index is still 30 per cent below its starting level. While AIM has been home to many individual success stories, the market as a whole has been a graveyard of failed ambition.
 
“The performance of AIM compares poorly with indices from the main market over the same time period. The conclusion is AIM is not a market for investors to buy en masse in the same way they may do with the FTSE 100 through a tracker fund. Instead they need to approach it with a fine tooth comb to make sure they are picking out the winners and avoiding the deadwood, or alternatively buy a fund where a fund manager does this on their behalf.”
 

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