Guinness Best of AIM Team

Shane Gallwey, CFA

Fund Manager

Andrew Martin Smith

Andrew Martin Smith

Fund Manager

Keith Hyman

Senior Advisor

Best of AIM Investment Process

Investment Methodology

Rigorous screening for persistent high cash-flow returns on capital, followed by in-depth analysis of business model and valuation

Investment Focus

High conviction portfolio of 20 companies on the London AIM market that qualify for Business Relief from Inheritance Tax

Minimum Initial Subscription

£40,000 (with minimum £20,000 top-ups at any time)

Charges

1% initial fee (advised); 1.25% (plus VAT) annual management charge.

Process

Our Best of AIM service uses a portfolio selection approach adapted from that used by our award-winning global equity funds.

Our process seeks to identify companies with a sustainable competitive advantage whose shares can be bought at a price which may not fully reflect their market position. To identify such companies we use a quantitative screen to find companies that have demonstrated persistent cash returns on investment (CFROI) well in excess of their estimated cost of capital. We then screen for critical mass and balance sheet strength to eliminate companies whose financial position might be vulnerable to set-backs. We also assess whether the company’s business and listing status appears to qualify for Business Relief for Inheritance Tax and that there is sufficient market liquidity to enable a position to be acquired. This series of screens eliminates more than 90% of AIM-quoted companies, revealing a short-list of some 60 companies (at 31 December 2017) that merit in-depth research and analysis.

Our in-depth research focuses on whether a company that has a history of consistent high cash returns is likely to be able to maintain that position; therefore we investigate its competitive position and the barriers to entry in its markets. Companies that can sustain high returns on capital over time should be valued at a significant premium on the stock market. We seek to identify those companies whose shares can be bought at a price which does not fully take account of their strong competitive position.

Our rigorous approach filters out much of the noise and hype that surrounds companies, particularly on the AIM market, to focus on the true signals that drive company valuations over time. In this way we seek to avoid some of the behavioural biases associated with being unduly influenced by market sentiment or narratives about companies.

Our process produces a high-conviction portfolio of shares in 20 companies taken from a range of industry sectors, which can be bought at reasonable valuation and which we envisage holding for the medium term.

We believe that our investment approach, of only considering companies which have demonstrated superior cash-flow returns over a series of years, will produce a portfolio with above-average resilience in the case of an economic downturn.