The Alternative Investment Market (Aim) was launched in 1995 as an incubator for smaller businesses, providing these with access to the external funds needed for rapid growth. And in a glowing demonstration of its ability to foster such expansion, at the time of our last Christmas review, the Aim All-Share Index was up more than a fifth on 2017’s opening price.
But as we write, that very same index has fallen 15 per cent since the start of 2018 – dampened by a particularly downhill October and November. This might well raise questions about whether Aim is still, in the London Stock Exchange’s words, “powering the companies of tomorrow”.
Arguably, Aim’s reversal of fortune this year is an important reminder of its intrinsic riskiness. Lighter-touch regulation and relatively few listing criteria can render some of the exchange’s constituents vulnerable to illiquidity, volatility or even collapse – particularly at the smaller end of the market. A major weakness is that the prospect of high growth can engender high expectations – which, as we’ve seen in recent weeks, are susceptible to swift deflation.