Small and mid-cap fund managers on the good – and bad – companies on AIM

Recent research has applauded the amount of capital being raised by businesses on AIM – a record £30m worth of funding was seen despite a drop in admissions. It’s no wonder then that small and mid-cap fund managers are viewing it as a genuine alternative to the main market.

This is according to a survey by RSM and the Quoted Companies Alliance, which queried small and mid-cap fund managers on their views of the stock market.

With the AIM’s success bringing it into the media spotlight, investors believed others now better understood when the junior market was for them – and that it contained a wide range of companies, not just startups. But most of all, investors pointed to the attributes of companies that did well despite the uncertainty of external events in 2016.

Strong companies were cited by small and mid-cap fund managers as being those that made acquisitions over the last year – one described it as a “self-help” strategy.

It was further highlighted: “Investors were impressed by new businesses that did well in 2016, showing outstanding growth and using concepts that didn’t exist five years ago.

“Adapting to what the market wants is essential. One investor claimed successful companies ‘have got a set, structural growth dynamic supporting what is being done so the firm is fixed on what it’s actually capitalised on’.”

There were less positive views too, with some small and mid-cap fund managers calling AIM “devalued” and “a poor place to be”. It was deemed to be clogged by a large amount of “sediment” at the bottom of the market.

Some even delved into the leadership behind the company, going so far as to describe chairs as “just appalling and a waste of space” because they fail to challenge management by asking the difficult questions.

As for the year ahead, the survey said: “The view is certainly that the market in general is going to find it hard to make much progress in the near future in the face of macro-economic headwinds. High levels of uncertainty are thrown up by both political factors, such as Brexit, and economic factors, such as expected interest rate changes and rising inflation.

“Managers have been talking of capex budgets already being trimmed by firms in anticipation of a consumer spending squeeze or capex spend being postponed until absolutely necessary to prevent over-expansion.”

Image: Shutterstock

By Shané Schutte

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