Managed in Yorkshire – Maunby IhT AIM portfolios add 36.9% in 2019 (16/01/20 )

Over the last twelve months, our in-house AIM portfolios showed a total return of just under 37%. The FTSE-AIM index generated a total return of 10.2% over the same period. These are portfolios that invest in shares we consider eligible for Inheritance Tax Business Property Relief. A useful tool that is available for estate planning, this relief allows clients to have access to the capital and income from such shares whilst avoiding inheritance tax, provided certain conditions and criteria are met.

The AIM market recovered some of the ground it lost so spectacularly in the fourth quarter of 2018; this is good news given that the index has had to weather Brexit complications as well as company specific issues, for example with its largest constituent, Burford Capital, a stock we have never held.  Our biggest success story was the purchase of Augean, a provider of specialist services for hazardous waste, in areas such as Energy from waste (EFW) & radioactive waste. We have followed Augean for a while before picking our entry point and we are delighted that the share price has more than doubled since its purchase in late August. Ergomed and Judges Scientific also delivered triple digit returns, heading up a sizeable pack of positive performers, of which the most impressive were CVS Group, Volex and Gamma Communications. A further boost to our portfolio returns came in the form of takeovers for two of our more problematic holdings PTSG and WYG.

Due to its composition of smaller companies with more volatile share prices, the AIM market is prone to stock specific issues, and over the course of twelve months, these are moe expectations than exceptions. 2019 saw problems for some big names including Burford Capital, Eddie Stobart and Eco Animal Health. Our worst performer was Proactis who provide software for spending control and their profit warning in the first quarter did impact on our results, though not significantly. This was not our only disappointment in the year, but it was the most significant.

We have identified heightened risk levels in AIM ‘mega’ cap stocks, which we believe carry the risk of ceasing to qualify for BPR relief. In addition, micro-cap stocks have been tainted as ‘a liquidity risk’, due to recent and widely publicised stories. Of our core twenty-six stocks, only three holdings have market caps in excess of £1bn and only two of the remainder have market caps of less than £100m. Our IhT portfolio is a mixture of growth and value stocks, with a prudent bias towards holdings that are evaluated as ‘steadier’. To summarise, although we hold a very diversified portfolio, those stocks with defensive qualities such as a high proportion of recurring contracted revenues are looked upon favourably. To that end, it is no surprise that in the nine years since we started our IhT portfolio service, we have delivered an average compound annual growth rate of 11.1%.

Figures correct as at 31/12/19

Risk Warning: By using our services your capital may be at risk. Tax treatment depends on the individual circumstances of each client and may be subject to change in future.