Investors in AIM are on a high

In contrast to previous surveys, the investors in our Small and Mid-cap Investors Survey, conducted in partnership with RSM and YouGov, were a lot more positive about the market.

Investors see AIM as better now than it has ever been with fewer failures and more quality despite what they call ‘sediment’ at the bottom end. They even say they think that the press is more respectful about AIM these days and better understands that it contains a very wide range of companies, from start-ups to real growth businesses. It is of increasing interest to a larger number of investors.

One manager said AIM can work very well by providing all the benefits of a full listing without the onerous demands and costs of the main market. The best companies mirror the most positive attributes of a full listing and adhere to the general principles and governance levels but with the benefit of a cheaper and more flexible structure. The key benefits of AIM are clearly being appreciated.

Investors are now confident of AIM’s ability to support growth and the more confident they become, so companies that have a good growth story to tell will flourish. However, it was clear investors remain stock pickers rather than investing in the market as a whole. All have different criteria when they screen the market so it is important that in their investor relations strategy, companies know who they are meeting and what is their investment policy.

We also asked about the key advisers on AIM, the nominated advisers (NOMADs) and brokers who advise the company on the AIM rules and work with companies to raise the finance they need. They are given a hard time by investors unless they have built up the trust over time to do a good job and to make the investors money.

The most effective advisers are those who conduct proper due diligence - checking that the company is sound in business model, strategy and resources - and who offer a complete service, including providing the ability to make an effective market in buying and selling the company’s shares.

Some of these advisers are clearly well regarded and trusted to do a good job as they are bringing fund managers relevant and valued investment opportunities in credible companies. The flipside is that some others are negatively perceived and will be avoided.

One manager told us: “Some NOMADs are dreadful, bordering on the negligent quite frankly…turning a blind eye to what they are getting involved in.” So it is imperative to choose advisers carefully and look at their track record over a decent period of time.

Balancing this, another investor told us: “I don’t think they (NOMADs and brokers) do a bad job in general. They get a bit of a kicking most of the time when things go wrong.”

Of course there is negative market behaviour and this should be dealt with accordingly by the relevant authorities. It’s not just the London Stock Exchange who have oversight of market practice, but there is also a whole range of regulators such as the Financial Conduct Authority and even the Serious Fraud Office.

That said, AIM has come of age. It is good to see that investors perceive the market as being as good as it has ever been. It plays an important role in the ‘ecosystem of small-cap funding’ and it has political recognition of this through things such as the removal of stamp duty and change to ISA legislation (successes to which the QCA made key contributions). It’s an essential UK asset.

This market enables companies to aim high in raising finance so that they can grow, create jobs and deliver long-term value for employees, shareholders and the other stakeholders involved. AIM provides the rocket fuel for companies to reach the stars. It’s great that investors see it this way.

The report on the survey can be found at www.theqca.com/investorssurvey2017