Funds on AIM
A number of advantages to the AIM market present themselves to
managers considering a listing of their fund. These include:
- access to a wider pool of potential investors
- fewer restrictions on the diversification of portfolio
investments, compared to the Main Market where no more than 20% of
a portfolio's assets may be in a single investment
- flexibility of structure – there are fewer restrictions on the
fund taking legal or management control of investments. Feeder
funds can also avoid some of the more onerous and preventative
Listing Rule requirements.
Admission - Investing Companies and Investment
Strategy
A fund seeking admission to AIM will meet the same admission
requirements as any other company. However, there are special
considerations which will additionally apply to certain funds.
The AIM Rules for Companies contain a definition of "investing
company", which is a company that, in the opinion of the London
Stock Exchange, has as its primary business the investing of its
funds in the securities of other companies or the acquisition of a
particular business.
There is a requirement for "investing companies" to raise a
minimum of £3 million in cash via an equity fundraising on, or
immediately before, admission. An investing company must also have
an investing strategy, which must specify the following:
- the precise business sector(s), geographical area(s) and type
of company in which it can invest
- how long it can exist before making an investment or having to
return funds to shareholders
- whether it will be an active or passive investor; - how widely
it will spread its investments
- what expertise its directors have in respect of evaluating its
proposed investments and how and by whom any due diligence on these
investments will be effected.
Other considerations
Not all funds will fall within this definition of "investing
company". In particular, property funds might invest directly in
real estate or infrastructure and will not fall within the
definition. However, many of the above considerations remain
relevant to ensure that the fund structure and mechanics are fairly
and properly disclosed in the admission document. Certain
considerations will apply to all fund types. For one, the valuation
of a fund will be the principal determining factor for its ongoing
market price. The method, timing and responsibility for the fund's
valuation will need to be clearly determined and disclosed.
Similarly, investors will scrutinise the fees charged by fund
managers as a key expense and cost on their investment. It is
essential that a clear fee structure is disclosed.
As an underlying consideration, funds are subject to a strict
regulatory regime and must ensure they are in compliance with
relevant financial services laws in their jurisdiction. Indeed, the
fund's initial structure and choice of domicile is often dependent
on the level of regulation that will apply.
