The Alternative Investment Market (AIM) may offer the best opportunities for investors in today's uncertain financial climate, according to Noble Fund Managers.
The firm says investing at a time when the stock market has been ‘beaten up’ is likely to produce significantly better returns than doing so when it feels comfortable.
It says the shares of smaller listed companies have suffered more than most in the credit crunch - as investors have sought refuge in the ‘safer’ haven of the blue chips – but says an investment now could be well rewarded.
“Over the last few months the valuation of AIM stocks has been hit hard by market volatility,” says Paul Jourdan, head of quoted investments at Noble.
“But in reality, investing when markets are beaten up, as they currently are, is likely to yield far more significant upside than doing so when the markets feel more comfortable – and hence more expensive.”
For those considering VCT investments, Jourdan points out the resulting current difference in value between those heavily exposed to AIM and those exposed mainly to private equity.
“Those which are mainly AIM-focused will have seen the biggest price falls in their holdings, because the stock market has been extremely fast at pricing in both a possible recession and a credit crunch,” he says.
“These funds offer very good value right now. However, with private equity holdings investors need to consider the valuation policy; it is unlikely that the same kind of downward price revisions will have happened.
“Price adjustments for private equity tend to occur only if trading is impacted, whereas the listed markets will mark prices down just on the fear of weakened trading. The actual impact on trading may follow 12-18 months later.”
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