Time Investments has launched a smart beta passive strategy, which combs the Alternative Investment Market (Aim) for prosperous tax-efficient companies.
The service, called Time:Aim, will invest in 25 Aim-listed business that are large, stable, profitable and qualify for business property relief (BPR) – making them exempt from inheritance tax after two years.
According to the investment firm, the smart beta approach helps to minimise the unpredictability normally associated with the performance of AIM shares.
The investment firm, which has run a capital preservation focused BPR service for two decades, uses financial, commercial and performance criteria to select companies in the AIM 100 index.
The portfolio will be rebalanced annually, according to the company, to ensure that investors’ holdings are evenly weighted and to minimise volatility.
Time said it has “rigorously” back-tested its methodology which, it claims, would have out-performed the FTSE AIM 100 benchmark in each of the last six years.
An initial 1 per cent charge and 0.8 per cent plus-VAT annual management charge are applicable. Portfolio rebalancing does not incur a fee.
The service is available within an Isa or non-Isa wrapper for maximum tax efficiency. The minimum investment is £25,000 or £15,000 for an Isa investment.
Stephen Daniels, head of investments at Time Investments, said: “Last year our Time:Advance BPR service had the second highest inflows in the capital preservation BPR market. This year we're addressing advisers' criticism of traditional AIM BPR services that they are expensive and their returns are unpredictable.
“Time:AIM provides investors with a unique way to access mature Aim-listed businesses with strong fundamentals thanks to our innovative 'smart passive’ investment strategy. We have been focused on reducing the risk associated with Aim shares and improving the consistency of returns but in a service with a significantly lower AMC than competing Aim services.”
Andy Brooks, managing director and chartered financial planner at Cambridgeshire-based Brooks Wealth Management, said: “I have no doubt that there is value in companies that qualify for BPR and other esoteric businesses but advisers should look very carefully at the product. It is going to be a difficult recommendation because these types of investments are viewed as high risk by the regulator.
“IFAs have a duty to have a full understanding of what the fund manager is trying to accomplish and how they plan on meeting their aims. They should then divulge this information in a way that is easily understandable to their clients.”
He added: “There seems to be no shortage of investments deemed high risk. The FCA has given us [advisers] permission to advise on peer-to-peer lending and venture capital trusts and enterprise investment schemes which are riskier than convention investment strategies.”
Charges: An initial 1 per cent charge and 0.8 per cent plus VAT annual management charge.
Verdict: Gems are waiting to be unearthed on Aim, but are best suited to investors with the propensity for risk and an adequate capacity for loss. There seems to be a greater choice for investors who are willing to take greater risks for the prospect of yields higher than what is offered by conventional investment strategies, with the advent of peer-to-peer lending as well as VCTs and EISs. For the right client, these types of products could add value within a diversified portfolio.