The Aim Trust, managed by Bill Brown, is running with a 70% technology weighting, although the inves...
The Aim Trust, managed by Bill Brown, is running with a 70% technology weighting, although the investment trust also has exposure to sectors including leisure and mining.
Brown, who is director of Aim equities at Friends Ivory & Sime, said the portfolio did not set out to be a technology fund but that this is where many of the best venture capital style opportunities have been in recent times.
He looks for companies where the management teams have a significant stake in the business as well as a clear business plan for growth and how to achieve it. He also looks for competitive advantages, such as intellectual property rights and a clear market for the company's product.
Speaking at the Investment Week Investment Trust Markets Forum last week, Brown said: "We have been looking at the Aim market since 1996 and we like these types of companies because of the venture capital J-curve effect you get in terms of performance.
"It takes a while for these companies to be valued but when they come through the valuations come through in leaps and bounds. Also, over the past five years there has been growth in the ability of UK and European markets to provide companies with capital at an early stage.
"Over 600 entrepreneurial growth companies have been attracted to Aim.
"Around 80 of these have gone on to a full listing while around 40 have gone bust.
"I believe this is a low failure rate for these types of companies."
He added favoured sectors for the portfolio are biotechnology, medical devices, drug discovery and medical equipment. Brown is also keen on computer and telephony integration, telecom services, networking and electrical equipment. Brown looks to assess the potential value of businesses in three to five years and identify the key risks to them.
He added the future value of enterprises depends on the ability of companies to generate profits in three to five years, the funding required to get eventual profits and the intellectual property of the business. He added P/Es can be effectively used to value venture-capital style companies after around three to five years.
Putting the tech into protection
Square Mile’s series of informal interviews
Fallout from Haywood suspension
Launching later in 2019
£80bn funds under calculation