CAVENDISH AIM FUND: A lot of the firms on Aim are awful, admits manager, so I hunt out the gems
Next month sees the 20th anniversary of AIM – the Alternative Investment Market. Since its creation, more than 3,000 smaller firms have used the FTSE’s junior market to raise vital capital to fund growth.
Though a success story for firms AIM has delivered mixed results for investors.
The AIM All-Share Index of its 1,077 constituents has woefully underperformed the FTSE All-Share Index over the past one, three and five years.
And over the past ten years AIM has fallen 11 per cent, while the FTSE All-Share has risen 118 per cent.
Most British fund managers, in particular those focusing on small firms, have a smattering of AIM holdings in their portfolios.
However, the market’s unpredictability and its eclectic mix of firms – from online fashion shop Asos, with its market capitalisation of £3 billion, to £2 million minnows – mean few managers are prepared to commit to researching it.
An exception is Paul Mumford, fund manager at Cavendish Asset Management, an under-the-radar investment house owned by Lewis Trust Group, which also owns the River Island clothing chain.
Talented: Paul Mumford is a star in the junior AIM market
Mumford has been at Cavendish since before AIM was launched and has a reputation as being one of the investment industry’s best stock pickers, as a result of his stewardship of Cavendish Opportunities, a fund that invests primarily in smaller British firms.
Since 2005 he has been managing Cavendish AIM too, a £31 million fund that invests in 75 stocks, exclusively in AIM, which means Mumford can boast he runs the UK’s ‘best performing’ AIM fund.
Mumford has outperformed the FTSE All-Share Index and has beaten the AIM index by a country mile.
He says: ‘When the fund was launched, AIM was over the 1,000 mark. Today, it stands at just 765.
‘By contrast the fund’s unit price has gone from £1 to £1.60.
‘A lot of companies quoted on AIM are awful, so you have to be selective.
'If I like a stock, I tend to invest only 1.5 per cent of the fund in it.
'It might then take a while for the share price to move in the fund’s favour but – if you’ve done your homework – the rewards can be huge.’
Laith Khalaf, an analyst at fund broker Hargreaves Lansdown, says Mumford is one of a few really talented managers in the small cap arena, along with Giles Hargreave at Marlborough and Harry Nimmo at Standard Life.
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