AIM companies continue to contribute to economy, and have fared better during the pandemic than the FTSE 100, writes AIM, which celebrates the eighth birthday of AIM companies being able to be in an ISA.
AIM writes: “Eight years ago, on 5 August 2013, it became possible to hold AIM shares in an ISA for the first time. Like now, the UK was emerging from recession and the then Chancellor, George Osborne, believed encouraging investment into fast-growing AIM companies would help jumpstart the economy.”
What’s happened since proves him right. In 2019 alone, AIM companies contributed GBP33.5 billion to the UK economy and supported more than 430,000 jobs. Importantly, jobs created by AIM companies are more productive with an average gross value added of GBP77,700 per filled job compared with the national average of GBP56,387.
Investors are benefitting too. Not only do they get access to an additional 800 or so investment opportunities not previously available in their ISA, it also means since 2013 they can potentially pass on their ISA free of inheritance tax to their heirs.
AIM stocks have held up relatively well since the pandemic began with the AIM 100 rebounding 76.6 per cent between 31 March 2020 – 30 June 2021, compared with 28.8 per cent for the FTSE 100.
Alex Davies, CEO of Wealth Club, comments: “We have reaped the rewards of the billions of pounds of AIM ISA investment over the last eight years. The AIM market is a compelling destination for fast-growing businesses seeking to raise capital. In the first six months of 2021, AIM companies raised GBP4.0 billion, more than during the whole of 2019, and up 37 per cent on the same period last year.
“AIM companies are highly investable, and as many as 68 companies currently in AIM are worth over GBP500m, spanning a diverse range of industries such as software, industrials and pharmaceuticals. It includes household names such as Boohoo, Asos and Fever Tree.
“As we come out of the other side of the COVID crisis, the revenue and jobs created by AIM will be crucial to the recovery. It should also provide investors with some exciting opportunities with the added bonus of inheritance tax relief.”
Investors can choose AIM stocks themselves within their ISA – they need to be aware that not all AIM stocks qualify for IHT relief – or they can get a professional manager to make the decisions for them.
Popular AIM ISA stocks for inheritance tax planning include:
GlobalData – GBP1.95 billion market cap. It is often said data is the world’s most valuable commodity. GlobalData collects and supplies over 4,000 companies, government organisations, and industry professionals with data and analytics. The business has seen revenue rise from GBP60 million in FY 2015 to GBP178.4 million in FY 2020.
GB Group – GBP1.7 billion market cap. GB Group is one of the world’s leading specialists in identity management, location intelligence and fraud prevention. In fact, GB Group is able to identify 60 per cent of the world’s population. The growth of e-commerce has fuelled greater demand for its services, so revenues have increased from GBP57 million in FY 2015 to GBP217.7 million in FY 2021.
Team 17 – GBP1.1 billion market cap. Team 17 is a UK based developer of video games, its catalogue includes the popular Worms franchise. This highly profitable business has grown strongly over the previous three years, with revenues rising to GBP83 million in 2020, from GBP29.6 million in 2017.
Popular AIM ISA portfolios
· Octopus AIM ISA – 0.75 per cent initial charge and 2 per cent AMC plus VAT. This is the largest AIM IHT portfolio, run by one of the most experienced AIM managers. It launched in 2005 so it has a track record of navigating a recession. The average market cap for companies in the portfolio is over GBP900 million and over 30 per cent of the portfolio is invested in companies worth more than GBP1 billion.
· RC Brown AIM ISA – GBP500 initial charge and 1.25 per cent AMC plus VAT. RC Brown operates a different strategy to Octopus and could complement it well. It looks to invest in new share issues of companies seeking capital for expansion. This leads the service to have a bias towards smaller companies. 45 per cent of the portfolio is invested in businesses valued at less than GBP250 million. The average market cap for companies in the portfolio is GBP742 million.