The market’s birthday is on 19 June. The Alternative Investment Market began with just 10 businesses with a combined market capitalisation of £82m and has been the launchpad for successes such as FeverTree and ASOS.
The market became popular with those wanting to reduce their inheritance tax liability, as there is relief for Alternative Investment Market portfolios. But in recent years, the market has become less attractive, as questions were asked about whether the relief would be scrapped and Chancellor Rachel Reeves halved it in the last Budget.
Adrian Murphy, CEO of wealth management firm Murphy Wealth, said the number of companies in the index had shrunk from 1,700 at its peak to fewer than 700.
He said: “It is difficult to say AIM has been a massive success, either in terms of its purpose of creating an incubator for the main market or as a way for investors to gain exposure to high-growth UK companies, with the reward of reduced inheritance tax (IHT) liabilities for taking the associated risk.
“With a few exceptions, there haven’t been many stories of household names developing out of the index.
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“Returns have also been poor – the FTSE AIM 100 sits far below its 2007 and 2021 peaks, and has delivered paltry returns over most time frames. This has all but negated the IHT benefits offered to investors – in the majority of cases, you would have been better off investing elsewhere for a higher return and paying any IHT due.”
The 11 survivors
Some 11 companies from the first six months of Alternative Investment Market’s existence remain on the stock market today, with three of them on the main stock market and one in the FTSE 100.
Insurer Hiscox is in the list of top 100 biggest British listed companies, and anyone who bought into it when it listed on AIM would have subsequently enjoyed a 2,650% total return, which factors in share price gains and dividends.
Genetics group Genus is another AIM survivor now on the main stock market, but in the FTSE 250, while investment trust Athelney also made the switch.
Dan Coatsworth, investment analyst at AJ Bell, said: “AIM has been called the ‘Wild West’ in the past and has had its fair share of disasters, yet it would be wrong to call the entire market a failure. It was designed to nurture growing companies, and the achievements of Hiscox and Genus prove it has been successful.”
Of the eight companies that remain on AIM from the beginning, four would have made investors a loss, and four a profit.
Coatsworth said the best performer among those still quoted on AIM is Wynnstay Properties, which has delivered a 6,331% total return.
Its history lies in developing and managing residential property in London’s Kensington area, but it switched to commercial property in 1972. While the business is still relatively small compared to many real estate stocks on the London Stock Exchange, the rich returns for investors speak for themselves.
The second-best performing stock is NWF.
“Supplying animal feed to farmers and filling up domestic heating tanks with oil might not sound very glamorous, but it’s been a ticket to steady wealth creation for NWF. A 920% total return since joining AIM in September 1995 is not to be sniffed at,” Coatsworth said.
