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Happy Birthday AIM, Possibly The World's Most Successful Growth Market

Is the Alternative Investment Market the most successful growth market in the world? That’s the claim a leading stockbroker makes for the junior market of the London Stock Exchange, which celebrates its 21st birthday on Sunday.

Is the Alternative Investment Market the most successful growth market in the world? That’s the claim a leading stockbroker makes for the junior market of the London Stock Exchange, which celebrates its 21st birthday on Sunday.

Graham Spooner, an investment adviser at The Share Centre, points out that AIM has come a long way since it went live in 1995 with just 10 companies listed that were worth a total of £82m. Today, AIM boasts 829 UK companies plus a further 187 international listings – the entire market capitalization is around £74bn.

“With increases like this, you could argue that Aim is possibly the most successful growth market in the world,” Spooner says. “AIM was created as a junior division of the London Stock Exchange to act as a platform for smaller and growing companies, in order for them to raise the capital needed for expansion, and this still remains the case 21 years later.”

There’s no doubt that AIM has made significant process since its earliest years, though there have certainly been ups and downs along the way. Some 15 years ago, the market listed more than 1,500 companies, but was subsequently buffeted by the collapse of the technology boom and then the financial crisis.

 

There have, moreover, been a series of scandals at AIM-listed companies, prompting criticism of the more laissez-faire standards of regulation on the junior market. There have been attempts to tighten the rules, though some of AIM’s critics believe there is still potential for investors to be caught out when trading in AIM businesses.

The UK Government, however, has consistently backed AIM as a way for smaller companies to raise equity capital. It has sought to encourage more investors to provide larger amounts of that capital with a series of tax breaks – in 2013, the market was given a boost with the announcement that AIM shares would henceforth be eligible holdings for investors’ tax-free individual savings accounts (Isa); this was followed by a decision in 2014 by the Treasury not to charge stamp duty on purchases of AIM shares.

The market’s performance has also been on something of a rollercoaster. The AIM 100 Index of the biggest shares on the market hit a high of almost 6,000 in 2007 before plunging to around 1,600 in 2008 – it has never recovered those dizzy heights and today stands at 3,380.

Against that, however, AIM’s fans argue that this is a stock picker’s market – a place to find hidden gems rather than to track an index. Certainly, companies such as ASOS have produced some big wins for investors over the years.

Still, while AIM is now coming of age, it is likely to continue to produce hits and misses. The five largest companies on the market today – ASOS, New Europe Property Investments, GW Pharmaceuticals, ABCAM and Hutchison China Meditech – underline how broad the range of businesses is on AIM. An even broader range of factors will affect their performance.

“There’s no denying that AIM remains popular among private clients who are excited by smaller companies and willing to accept a higher level of risk,” adds Spooner, who insists the market is has been a success. “Over the years, over the years, 3,600 companies have chosen to join AIM – the index is large and diverse, and by its nature it contains riskier companies than the broader index.”

 

 

Source: Forbes.com