Finding the right investors when you float on AIM is like entering a maze. Our exclusive research uncovers the biggest investors on AIM.

Finding the right investors when you float on AIM is like entering a maze. Our exclusive research uncovers the biggest investors on AIM.

AIM is easily the largest, most successful growth market in Europe. Indeed, apart from the Nasdaq in the United States, it’s difficult to think of a more energetic, burgeoning market for early and growth phase companies anywhere else in the world.

The secret of AIM’s success is that it possesses the appropriate trading platform and the right regulatory environment for young ventures. Perhaps more importantly though, it puts its companies on the radar of heavyweight institutional investors, the organisations which supply the life-blood of growth – hard cash.

Now our sister publication Growth Company Investor, with the help of specialist mid and smallcap brokers Teather & Greenwood, has interrogated our databases to find out which are the biggest investors in several different categories.

The cash institutions have invested is truly impressive. As of 5 August 2003, there were 700 companies on Aim with a combined value of £12.68 billion. Institutional investors owned shares worth an incredible £4.46 billion – 35.2 per cent of the market. This total represents money invested in companies prior to, during and after their float.

The biggest investors – by number
In terms of the number of companies, ISIS Asset Management Group is the biggest investor in AIM. It holds stakes of varying amounts in 73 companies worth £111.10 million through its array of investment funds, such as The Aim Trust, The Aim VCT, Baronsmead VCT and Active Capital Trust.

According to fund manager David Thorpe, ISIS – like many – adopts a case-by-case attitude to investing in the junior market. This has led to it holding stakes in a variety of sectors from cake maker Inter Link Foods to travel promotions business Landround.

Says Thorpe, ‘we like service sectors like consumer, healthcare, media, IT and business services, and we like to invest over the medium term.’

Another feature of the ISIS approach, which, once again, it shares with almost all institutional investors, is the importance it places on management. In many cases, it’s the quality of the management that sways the investment, rather than what is being produced, However, this investment does come at a price. Thorpe comments ‘we want to have a good dialogue with the board on strategy, and we’ll expect influence over the strategy.’

Other generalist fund managers such as AMVESCAP, Singer & Friedlander and Close Brothers also rank highly. AMVESCAP has a weighting towards engineering, mining and utility companies while Singer & Friedlander’s eclectic mix of AIM possessions stretches from banking software play AFA Systems to garden centre operator Blooms of Bressingham. Close Brothers too has a wide and varied mix, although software and media companies feature prominently.

At number ten on the list is Herald Investment, home of star fund manager Katie Potts. A preponderance of small software companies dominates the Herald AIM pot, although there is a sprinkling of media ventures.

The biggest investors – by value
The largest investor in terms of the value of its holdings is AMVESCAP Group – a large slug of that value pertains to utility company Northumbrian Water (which has since moved to the Full List of the London Stock Exchange). Other investments include accountancy practice play Numerica and telecommunications group Patientline.

Interestingly, the presence of fund management giants such as Fidelity, M&G and Schroder belies the myth that entrepreneurs of small AIM vehicles cannot attract money from global players.

Just as intriguing though is the presence of Artemis, not one of the biggest asset managers on the market but very much an influential player on AIM with 27 investments worth a total of £58 million. One of its main fund managers is John Dodd, whose UK Smaller Companies Fund is one of the best performing funds in its class over three years. Like many fund managers with a solid reputation, his presence on the shareholder register can often transform other investors’ – and the markets’ – perception of a business.

Sector focus
In terms of the sector breakdown mining dominates, illustrating more than anything the capital requirements of companies in this sphere and the fact that AIM is home to so many small global players.

After mining, real estate has attracted most cash, an indication perhaps that in the fragile financial climate of the past few years, institutions have sought to de-risk their portfolios by backing those companies with solid assets.

That said, entrepreneurs should take a lot of comfort from the fact that nearly £0.5 billion is the value of institutional investments in the support services field while leisure (which includes those running pubs, clubs, hotels and health clubs) is another favoured destination for institutions with cash to invest.

But while mining leads the way in terms of investment value, software tops the pile when it comes to investment number. A total of 268 individual investments have been made by AIM’s horde of institutional players in this sector.

Entrepreneurs in the media sphere are the next most popular management teams to be backed, with no less than 251 different funds pouring in their cash. With two other diverse sectors – support services and leisure – holding down top spots, it appears that most fund managers take a company-specific view of AIM, and are not as risk averse as many would imagine.

A perfect example is Michael Cunningham from Rathbones, an operator of some of the most successful VCTs. Says Cunningham, ‘I am not a prescriptive investor. [Those] who peruse this sector or that sector are restricting their choices. I rule nothing out and rule nothing in. Everything is judged on its own merits, not because the wider sector might currently be in vogue.’

Cash for development and expansion
The research also provides a degree of reassurance to those running a business valued at less than £5 million and those valued at between £5 million and £10 million. These are usually most in need of development and expansion capital, and the message seems to be there are a lot of interested parties around.

For instance, ISIS has holdings in 12 companies with a value of less than £5 million, the smallest of which is Advance Visual Communications, a struggling tech venture with a value of just £0.4 million (of course, given the vagaries of the market, the value is likely to have been much higher when ISIS invested).

Rathbones has 11 stakes in companies worth less than £5 million. Its least valuable holding is a £730,000 stake in Longmead, a financial services tiddler. Global behemoth Jupiter Asset Management is involved with seven companies worth less than £5 million.

In the £5 million – £10 million league the usual suspects of ISIS, Singer & Friedlander, Artemis, Rathbones and Herald all predominate.

Unicorn Asset Management holds four stakes (and five in ventures below £5 million). This fund management has an eclectic and opportunist approach to the AIM market, focusing on potential rather than size.

‘Over the last 12 months we’ve focused on technology, which is a long-term growth area. We also like media, we’re big buyers of recruiters, and we like the outsourcing theme in IT and healthcare,’ says Unicorn Asset Management’s Sean O ‘Flanagan.

Order the full report

This feature is part of a more comprehensive 16 page research report on AIM’s institutional investors. The report is available, in PDF form, priced £75 plus VAT. To order a copy, call 020 7430 9777.