Many of these companies have been followed by Octopus Investments for decades, according to Richard Power, head of smaller companies at the group, who said the fund would target larger and more established AIM companies.
“The average market capitalisation of the underlying investments will be £200m, so they are steady reliable growth opportunities rather than stocks that will make an investor 10x their money. They will have a decent balance sheet, management teams with experience, a niche product or service and visible growth,” he said.
The Octopus AIM IHT ISA is designed to exempt the holdings from inheritance tax after two years. This means ensuring the underlying companies meet the rules on Business Property Relief. Also, investment has to be direct rather than unitised.
The new ISA will invest in 25-35 AIM companies. There are currently 1100 Aim companies, of which around 120 would be eligible for inclusion in the Isa.
The rules on Business Property Relief are strict, so the group has engaged PricewaterhouseCoopers to do a review of all the holdings to ensure they still meet the criteria.
Power said AIM shares have lagged the rally in smaller companies, with investors looking to the most liquid smaller cap companies first, but performance has been considerably better over the past year: “They tend to be a later cycle investment. They lagged the original smaller cap rally, but they are starting to participate and there has been a re-rating.”
The new product is an extension of the Octopus AIM IHT tax service, which has a minimum investment level of £25,000 and has been running since 2005.
