The Aim 100: 100 to 51

Of particular note was the removal of the restriction previously preventing the majority of Aim-traded shares from being directly held in an individual savings account (Isa). The exclusion was the consequence of Aim’s status as a sub-market to the LSE’s main list, and thus not ‘a recognised exchange’ – the amendment to the Isa legislation in August now means that shares trading on any market of exchanges within the European Economic Area now qualify. That’s obviously good news for Britain’s Isa investors, who flocked to the market in droves as a result – stockbrokers reported huge inflows of retail cash into Aim shares, driving the Aim All-share Index 11 per cent higher over the last seven months, way ahead of main market indices such as the FTSE 100 (up 1.15 per cent) and the FTSE All-share (up 2.35 per cent).

That’s not to say everyone was pleased with the rule change – against the overwhelming support in favour were dissenting voices who suggested that Aim shares were more volatile than those of fully-listed companies, and that hard-earned savings would go up in smoke when the good times inevitably evaporate and investors struggle to get out of the market’s less liquid shares. Aim’s inherent riskiness, they said, meant it was a market better suited to more sophisticated institutional investors who better understood those risks.

There is, of course, some truth to these fears – Aim’s looser regulation does mean that its shares can often be tightly held by a handful of investors who care little for the interests of the retail investors on the shareholder register. That can contribute to lower liquidity, wider bid-offer spreads and difficulties trading at the prices you want. And, as for volatility, the plight of Aim’s oil and gas and mining companies is a case study in the formation and subsequent popping of stock market bubbles – those sectors have fallen 55 and 71 per cent, respectively, in the last three years, leaving many investors who bought at the wrong moment nursing heavy losses.

That’s likely to include many private investors – as Stephen Wilmot wrote last week, many Aim investors have confined their investment activities to one speculative punt or a range of positions in a single sector, usually resources. That trend has done little to shake off the view of Aim as a ‘casino’ market for speculators searching out the next 10-bagger. And the removal of stamp duty from Aim shares (another major change which becomes operative on 28 April) is, some argue, likely to attract the wrong kind of investment into Aim – those looking to turn a quick profit rather than build a long-term position.

The reality, though, is that there is much more to Aim than this. While resources still accounts for a large proportion of Aim companies, the bulk of the market’s constituents – the remaining four-fifths by value – give you exposure to an impressive array of interesting business models and technologies. As we wrote last October in our feature ‘The Ideal Aim Portfolio’, it’s perfectly possible to build a diversified portfolio using just Aim shares that gives you similar exposures to the main market, from retailers to banks to engineers – or even mature companies paying dividends, including some that are well over a century old. That’s despite the fact that Aim has shrunk from a peak of 1,600 companies in 2005 to just over 1,000 today, with over 2,000 disappearing on the way – a pruning that has arguably improved the market’s quality and created a more fertile environment to attract new and exciting companies from all over the world. And although many Aim companies have fallen by the wayside, many more have made the leap to the main market.

Many Aim shares also receive relief from inheritance tax, subject to qualifying criteria, but you don’t need to sacrifice quality to take advantage of the break; Charles Stanley Inheritance Tax Portfolio service grew 64.8 per cent in the last 18 months, beating the FTSE All-Share threefold.

This week we will look at the first 50 companies in the Aim 100 Index, counting down from 100 with the final 50 in the issue of 18 April. Interestingly, Aim’s largest company would make the FTSE 100, while a further dozen are comfortably large enough to enter the FTSE 250 – a sign that London’s junior market has now well and truly grown up.

100-91: Silence Therapeutics to Blur Group

90-81: Asian Citrus to CVS Group

80-71: Redcentric to Telford Homes

70-61: Vertu Motors to Highland Gold Mining

60-51: Utilitywise to Tungsten Corporation