Are you fit for Brown Shipley’s AIM Portfolio Service?

April 18, 2017

Here, regular attendee and supporter of K-Club – Mike Smith of Brown Shipley – provides an overview of their AIM (Alternative Investment Market) Portfolio Service for you.

This service offers an opportunity to shelter a part of your estate from Inheritance Tax (IHT) after two years, while still retaining full control of the assets and the income they earn.  The portfolio also aims to achieve capital growth over the longer term through a careful selection of companies that meet our strict investment criteria.

We experienced another year of strong performance from our AIM portfolio which was up 28.7% for 2016, outperforming the FTSE AIM index by around 11.5%.  This was despite Brexit worries, currency headwinds, deflation issues and specific one-off company events impacting our holdings.

Key Summary Features of AIM
Qualifies for 100% IHT relief after two years
Growth prospects of young and established companies in a dynamic market
Not a pooled investment – you own individual shareholdings
Minimum investment – £100,000
Investment managed through Brown Shipley’s Discretionary Management Service

What we look for:
We look for businesses with liquidity (the ease with which shares in a company can be sold).  This can be a particular concern when considering companies listed on AIM.  Of course, the critical criterion for selection is the ability to qualify for Business Property Relief.

So we search for companies with:
• Market capitalisation greater than £40 million
• Adequate shares available in the market

Companies should be well established:
• Consistently profitable trading record
• Good recurring sales records
• Positive earnings’ forecasts
• Low sales/earnings volatility

They should be sound strategically and financially:
• A viable business model that we can understand
• No excessive gearing (the amount of debt a company has in relation to its equity capital)
• Reasonable growth forecasts
• Asset backed, where possible

They must be reasonably valued:
• Sensible Price/Earnings Ratio (P/E), a standard method of valuing the stock of a company

Investors should be aware that investment in companies listed on AIM carries the highest level of risk associated with investment in company stocks and shares.  In general terms the value of AIM companies fluctuates more often and to a greater degree than more established companies on recognised indices such as the FTSE 100.  Investors may lose some, or all, of the amount originally invested.

AIM listed companies are often more difficult to sell.  If a company ceases to qualify for Business Property Relief then the value of money invested in that stock would be subject to IHT.  It is therefore important that Investors seek professional and expert advice in respect of the use of AIM stocks as part of their overall wealth planning.

Brown Shipley Investment Services are available to clients who have a minimum of £500,000 of investable assets.