There’s never been a more exciting time to attract big investors and float your company on AIM. Business XL’s unique research reveals that more institutions are investing more cash than ever before.

AIM, the UK’s market for growth companies, has well and truly come of age. In our second annual survey of institutional investors in AIM, conducted in association with our sister publication Growth Company Investor and leading small and mid cap broking house Teather & Greenwood, we have found that professional fund managers are investing more cash in more companies more frequently than ever before.

In total, institutions now hold 38.3 per cent of the shares of AIM’s 950 or so companies. The value of this stake is worth £9.75 billion, which compares favourably with the 35.2 per cent stake – worth just £4.46 billion – that they held last year, when the market had 240-odd fewer companies.

Entrepreneurs of every hue should welcome this development, and the fact that these investors are backing companies of all shapes and sizes across many different sectors. And it’s not just UK fund managers you can access if you need cash. Global players, both big and small, are now more than willing to invest in young, growing British companies.

The most active institutions by value
AIM’s biggest investor by value is Canadian debutant CDS & Co, a vehicle that represents domestic Canadian private investors. Despite holding just five individual investments, CDS occupies the top spot by dint of its controlling or significant stakes in five out of the top ten AIM companies by market value. (Interestingly, nine out of the ten most valuable stocks on AIM are natural resource plays and all would qualify for the FTSE 350 were they listed on the main market.)

CDS owns 69.3 per cent of First Calgary, 70.8 per cent of Bema Gold, 44.1 per cent of the shares in First Quantum and a 40.2 per cent stake in Yamana Gold. Its other interest is a dominant 91 per cent holding in Greystar Resources.

Because CDS is something of an anomaly, it’s probably fair (and much more useful to you if you’re thinking of floating) to recognise Fidelity as the most influential investor in the market. In all, its 59 investments are worth £359.67 million, a significant increase in the value of its AIM investments over this time last year (£93.6 million). Its holdings include investments in up-and-coming retailer Floors 2 Go, leisure venture Center Parcs and publishing group Centaur.

Last year’s second largest institution was ISIS Asset Management, which has recently merged with Foreign & Colonial. The institution remains one of the largest AIM investors.

One fast-growing concern worth taking note of is Edinburgh-based Artemis, home of star fund manager John Dodd. It is now third in the list, with investments worth £239.3 million (last year its AIM investments were worth £58 million). Artemis’ growing portfolio of companies includes the revamped software group Planit, Torex Retail (also in software) and the impressive Civica, a public sector consulting, software and services venture.

Largest institutions by number of investments
In terms of the actual number of investments made, once again Foreign & Colonial, Artemis and Fidelity dominate, with the first two both having over 70 individual investments in AIM companies. Artemis has jumped from twelfth last year, with 27 investments, to second, with 74 investments. One of its most important vehicles is its £40 million AIM Venture Capital Trust (VCT).

The importance of VCTs to AIM perhaps explains why the likes of Singer & Friedlander, Rathbones and Unicorn also moved significantly higher up the rankings. However, the diversity of the institutions that AIM is able to attract is illustrated by the pre-eminence of Fidelity, Framlington and Gartmore.

Sectors attracting cash
Our unique sector-based research gives you a good insight into the types of companies that institutions favour.

Natural resources have maintained their dominance of AIM, as commodity prices have continued to surge. Nine out of AIM’s ten largest companies are from this area so perhaps it’s not surprising that the value of institutional investments in the oil & gas and mining sectors make up 39.7 per cent of the total institutional investment in AIM.

A notable faller is the real estate sector, down from second last year to 12th this time, principally because of the recent departure of shopping centre owner Peel Holdings from the market. This meant the value of property investments held by institutions on AIM nearly halved to £257.1 million.

The support services and leisure sectors have maintained the third and fourth spots they occupied last year, even though the value of institutional holdings in each has jumped. The two sectors attracting the most individual investment (by number, not value) are once again speciality & other finance and software. This reflects AIM’s most popular sectors in terms of number of companies.

Investing in growth
If you’re running a fledgling venture, you will be pleased to note that many institutions continue to back AIM’s smallest companies, despite the increase in large companies joining the market.

It’s also worth noting that the major investors at the smaller end tend to be VCT managers, since VCTs can only invest in companies with gross assets below £15 million. Examples include Foreign & Colonial, which runs several dedicated AIM funds. Foreign & Colonial topped both these tables last year but in the sub-£5 million area it has ceded its place to Singer & Friedlander, another VCT specialist. Among Singer’s investments are Award International, a small, growing marketing and travel promotions business, and diagnostics developer and manufacturer BBI.

Rathbones, which runs a string of VCTs under the Pennine brand, continues to have a significant presence. AIM counters it has high hopes for include innovative printing retailer Printing.com and the much-fancied food group Napier Brown Foods.

Backing new issues
Over 240 companies have joined AIM since our previous report into this area. Most have been new issues, though several were transfers from the Full List. Amvescap, the busiest investor in AIM new issues last time, principally on account of its stake in Northumbrian Water, has fallen in significance.

Replacing Amvescap as the leading institution in terms of both number of new issues backed and the value of these investments is Artemis. The group has invested in 21 new AIM companies, injecting a total of £99.5 million.

Fidelity has also increased its rate of investment in new issues. Last year the group put £17.3 million in four fresh AIM companies. This time Fidelity has backed 17 companies, investing £84.2 million. Its list of new issue companies includes M&C Saatchi, UK-based energy concern Star Energy and PD Ports, which is on its way to the Full List.

Foreign & Colonial only supported three new issues last year but has backed 14 companies this time, committing £58.7 million. Other major institutions that are playing an increasingly crucial role in backing new ventures are Credit Suisse First Boston, which has invested £70.3 million in nine new issues, and Schroders, committing £36.8 million to ten new companies.

If you’re thinking of floating, all of this represents good news.

Buy the full report
This document is part of a more comprehensive 16-page report on Institutional Investors in AIM, compiled by Growth Company Investor. The report is available in PDF format priced £195 + VAT. To order a copy call 020-7430 9777.