Embrace risk to boost growth, pleads boss of London's struggling AIM junior market
Marcus Stuttard said that over the last decade British investors had become too 'risk-averse', which meant they were less likely to take bets on smaller companies and newer technologies.
He told the Mail: 'We all recognise that we need higher [economic] growth rates.
'But in order to generate that we have got to celebrate and back the people who take risks – the entrepreneurs, the founders that start these companies and grow great businesses.'
He added that investors needed to recognise that achieving 'much higher returns' from investing also meant the potential for losses. 'We need to accept that and embrace it,' he said.
AIM – short for Alternative Investment Market – is a sub-division of the London Stock Exchange (LSE) that was founded in 1995.
But it has struggled amid a sharp fall in the number of firms on the market.
Some point to disappointing returns. At the same time the wider London market is facing an exodus of firms being taken over or moving their listings overseas.
AIM has listing rules which are less strict than those of the LSE's main market. It means smaller companies with less cash can still list on the stock exchange.
But after a peak of 1,694 firms on AIM in 2007, the number is now around 650 as the appetite for smaller and higher-risk companies among investors has declined in favour of fast-growing US tech stocks.
It was also dealt a blow in October when Chancellor Rachel Reeves announced inheritance tax relief on stocks in firms on the market would be slashed from 100 per cent to 50 per cent from next April – discouraging people from holding shares in smaller companies to save on tax bills.
'You would think a Chancellor who talks often about 'growth mission' and wanting to see increased investment in UK domestic assets would be a full throttle champion of AIM, but this is not the case,' said Jason Hollands, managing director at wealth manager Evelyn Partners.
He added that while AIM's anniversary 'might be considered a cause for celebration' – with the market raising £136billion for more than 4,000 companies since its inception – it is now seeing tougher times.
Luke Barnett, head of tax advantaged investments at St James's Place, said: 'Recent years have been challenging as it has underperformed the FTSE main market and missed out on the broader market rebound. Despite attractive company valuations, investor appetite has waned.'
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