Big name companies on well-known stock exchanges dominate the market. When investors think of buying shares, they will usually think of well-established, reputable companies with a secure place in the market. However, the potential offered by investment in up-and-coming companies should not be underestimated.
The Alternative Investment Market (Aim) offers shares in growing companies looking for capital to expand their business. The companies listed on this exchange are not limited to small firms looking to become a household name; it includes a number of mature companies looking to expand their investment base to a wider market, such as ASOS, Morrisons, ITV, and Jimmy Choo.
The London Stock Exchange introduced Aim in 1995 to be an international market for growing companies. Diversity of the stocks within Aim is a key feature of the market, which includes more than 1,100 companies from 37 sectors, 90 sub-sectors, and 26 countries.
Advisers looking to add Aim stocks to their clients’ portfolios need to be aware of what makes this market unique, and the potential benefits and risks associated with shares in this type of market.
On top of the chance to get in on a budding company in its early stages, Aim offers a more favourable tax status over other markets, making it appealing to individual investors.
If clients are looking to purchase shares in entrepreneurial businesses from all over the world with a focus on growing for the future, then perhaps they should consider those on Aim.
Market performance
Since its inception over £87.8bn has been raised through initial public offerings (IPOs) and capital raising on Aim, and more than 3,524 companies have been admitted to the market. Companies are not tied to Aim forever, as many often breach the larger main markets after a few years of grounding themselves and gaining maturity on Aim.
Aim has three investment indices to track the companies within it – the FTSE Aim UK50, FTSE Aim100, and the FTSE Aim All-Share Supersector Indices.
Introduced in 2005, the FTSE Aim UK 50 Index is a stock market index containing the largest 50 UK companies listed on Aim, weighted by market capitalisation. This list is reviewed quarterly. The FTSE Aim 100 may contain some overlap with the FTSE Aim UK 50 as it lists the top 100 companies on Aim. The over-arching exchange is the FTSE Aim All-Share, which comprises all the companies listed on Aim.
