The quality and depth of companies on the Alternative Investment Market (AIM) has improved markedly in recent decades, and become a reliable source of investor returns, according to Harry Nimmo, who runs about £2.5bn across a range of UK smaller companies funds at Aberdeen Standard Investments.
The AIM stock market was created in 1995, with the specific aim of encouraging investors to deploy capital in slightly higher risk businesses.
As a result it has less stringent rules for companies wishing to list and also offers tax reliefs for investors in most of the shares listed on the market.
Nimmo, who runs the Standard Life UK Smaller Companies fund and an investment trust, said when he began investing in UK small caps the AIM was “full of low quality businesses, there were lots of miners and such".
He added: "But it has changed now, there are a lot of companies where the founders have significant shareholdings, and we tend to like those, companies like Asos, which we owned for a long-time.
"The reality is a lot of the companies on AIM now are well run and are in sectors that are the growing companies of the future, whereas I think of the FTSE 100 as a bit of a wasteland.”
Jochem Tielkemeijer, client portfolio manager at Natixis, said while UK smaller companies presently trade at a lower valuation than those of the US and Europe, this was not a guarantee that the UK will perform better in future, though he said the "negativity" around Brexit "may be overdone" and this may spark a revival in UK shares.
david.thorpe@ft.com
