As stamp duty is lifted off AIM shares, Hargreaves Lansdown considers the AIM investment options

21st March 2013

The Budget saw the Chancellor George Osborne lift stamp duty for those trading in the shares of AIM listed companies. The Government is also consulting on whether to allow investors to put AIM listed shares inside their Isa with the pros and cons considered by Mindful Money earlier this week. However Hargreaves Lansdown has set out three ways in which investors can already access Aim detailed below including some commentary from senior investment manager Adrian Lowcock.

1. AIM stocks in your Pension

While the Chancellor is consulting on allowing investors to place AIM shares inside their ISA, investors can already do so inside a pension. Constructing a portfolio of individual AIM shares yourself will be the highest risk approach and require a significant amount of research.

Most popular AIM shares (in HL Vantage) in 2013 in Alphabetical order

Baobab Resources

Bowleven plc

Cupid plc

Fastjet plc

Gulf Keystone Petroleum

Nanoco Group

Quindell Portfolio Plc

Range Resources

Sirius Minerals

Xcite Energy

2. Smaller Companies Funds

There are several managers who run unit trusts which have a bias or focus to AIM shares. These funds are already available inside an ISA so investors can access them right away. This approach is less risky than constructing a portfolio yourself – you get access to an expert manager who spends their time researching AIM shares. The portfolio is also likely to be more diversified so investors will not be relying on the performance of just a few individual shares. This approach is also likely to help keep costs under control.

Marlborough Micro Cap fund, managed by Giles Hargreaves has 67% invested in AIM shares. Giles Hargreaves is an exceptional stock picker, looking at a company’s potential rather than the wider economy. His track record has been brilliant and the fund has returned 21% in 2012 and 590% over the last 10 years, whilst the FTSE AIM has returned 2.8% and 43.9% respectively.

Cazenove UK Smaller Companies fund, managed by Paul Marriage has 35% invested in AIM shares and has returned 36.6% in 2012 and 397.2% over the last 10 years.

3. VCTs

Investing in AIM was once the main stay of VCTs. Over time this market has evolved and developed with many managers finding different ways to interpret the VCT rules. However a few VCTs are still AIM share specialists. Investors get significant tax benefits by investing in AIM shares via VCTs. Taxpayers will receive an income tax rebate of up to 30% on VCT investments, tax-free dividends and tax-free growth. Hargreaves Hale VCT is currently open to new investors. The VCT is also managed by Giles Hargreaves.

Adrian Lowcock, Senior Investment Manager, says: “Removing stamp duty makes sense as it will directly benefit hundreds of smaller quoted UK firms, lowering their cost of capital, help promote jobs and encourage investors to support growth across the UK. Allowing AIM shares to be included into the ISA allowance is the right decision. ISAs already allow investors to buy and trade Exchange Traded Products which are also considered risky investments by the FSA.”

“Investors do need to understand the potential of the AIM market, in the past the market was full of many small start-up companies from which only a few managed to grow. Nowadays there are many more established companies, as well as small growth companies, which prefer the AIM market as the listing rules are less demanding. AIM shares and VCTS are high risk and not suitable for everyone.”

“The AIM market does tend to follow trends and we have seen in recent years that commodities and mining stocks are very popular. AIM shares can be very volatile even over a short time period so investors should be away of risks. It is clear that stock selection and expert investment knowledge are essential when it comes to investing in AIM. I prefer taking the approach of investing in a fund such as Marlborough Micro Cap or Cazenove UK Smaller Companies fund.”

 

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