Octopus AIM IHT ISA

The Octopus AIM Inheritance Tax Service has been managed by the Octopus UK Smaller Companies investment team since 2005. The team manages £2.2 billion in UK quoted companies and is also responsible for the Octopus AIM VCTs, the Octopus UK Micro Cap Growth fund and the Multi-Cap Income fund. The Octopus AIM Inheritance Tax Service alone manages £1.7 billion. 

  • Portfolio of 20-30 stocks
  • Bias towards large and well-established growth focussed companies
  • Minimum investment £20,000 (£25,000 outside an ISA) – you can apply online (ISA only)
  • Apply in an ISA: top up or make a new subscription online using the link below. To transfer existing ISAs, please download, print and complete the application form and post it to us
  • Apply outside an ISA: please contact us for details

Important: The information on this website is for experienced investors. It is not a personal recommendation to invest. If you’re unsure, please seek advice. Investments are for the long term. They are high risk and illiquid and can fall as well as rise in value: you could lose all the money you invest.

ISA: apply online or top up

The manager

The AIM IHT Service is managed by the Octopus Quoted Smaller Companies investment team, which manages £2.2 billion in quoted investments across all Octopus products (June 2022). As the name suggests, smaller company investing takes up 100% of the team’s time. 

Headed up by Richard Power and Kate Tidbury, Kate first joined Octopus as a fund manager of smaller companies in 2008, while Richard joined Octopus in 2004 and has worked in smaller company investing for over 25 years. Richard and Kate are part of a team of 10 that has more than 100 years of industry experience. Together, they conduct more than 900 face-to-face meetings per year to help identify what they believe are the best investment opportunities. This level of activity is likely to be hard to replicate by competitor AIM IHT providers. The dedicated investment resource is a key differentiator for the Octopus AIM IHT service, in our view. 

Overall, the wider Octopus Group manages £12.5 billion on behalf of over 63,000 clients (March 2022). 

Octopus will hold your shares on your behalf using its own nominee company.

Meet the manager: Watch our interview with Richard Power

 

Investment strategy

There are over 800 companies on AIM – but only 20-30 make it into the service's buy list.

The companies held are not fledgling businesses. Octopus looks for established firms with growth potential, with one or more of the following characteristics:

  • Strong market position or global leader in its field 
  • Scalable growth-focused business model 
  • Proven management team with a successful track record 
  • Strong balance sheet, preferably showing profitability 
  • High level of recurring revenues and earnings visibility
  • Ability to pay dividends 

Current portfolio overview

One of the key tenets of the investment strategy is to back businesses with strong market positions. Therefore, companies in the portfolio tend to be larger than one might expect. In fact, the average market value of the portfolio companies is £734 million (June 2022). Approximately 20% of the buy-list has a market cap greater than £1 billion and only 8% is valued at less than £250 million.

There are currently 25 companies on the Octopus investment team’s “buy list”. The buy list contains stocks the team deems suitable for investment. Whether these stocks are included within a specific client’s portfolio – and in what size – will be determined at the discretion of the investment team based on liquidity and market conditions. As this is a discretionary service, each client portfolio is slightly different. 

The buy list has a bias towards industrial support services, construction and materials businesses across diverse sectors, and software and computer services.

The chart below shows the sector breakdown for the current buy list.

Sector breakdown (%)

Market capitalisation breakdown (%)

Source: Octopus Investments, as at 30 June 2022

Examples of portfolio companies

Next15 – Octopus AIM IHT.jpgNext Fifteen Communications Group

Established in 1981, Next Fifteen Communications Group (“NFC”) is a global consultancy firm. The business started life as a specialist PR and marketing agency for B2B technology companies and its success on this front helped to secure long-term relationships with some of the biggest brands in the industry, including Apple, Google, and Microsoft. 

More recently, NFC has transitioned to a broader ‘growth consultancy’ model, facilitated by its portfolio of 25 brands and services. The company now operates across four segments: insight, engagement, deliver, and business transformation. 

In FY 2022, the group announced net revenues of £362.1 million, a 36% increase compared to 2021. Over the same period, NFC secured Aston Martin, Boots, and Duolingo as new clients and acquired four companies, including Engine UK, the largest acquisition NFC has made to date.  

Octopus Investments is the group’s largest shareholder (April 2022). 

Renew Holdings – Octopus AIM IHTRenew Holdings

Renew Holdings plc provides specialist engineering services to maintain and develop energy, environmental and infrastructure assets. The holding company operates a number of subsidiary businesses that provide engineering services to key sectors, including highways, rail, nuclear, water, and telecoms.

The company’s strategy concentrates on developing its range of engineering services, both organically and through selective acquisitions. Today, the business is deeply embedded within the UK’s infrastructure market with the majority of its projects underpinned by long-term programmes of committed funding. 

The company posted record results for H1 2022, securing an order book of £771 million and generating revenues of £414 million (up 13% on 2021). Past performance is not a guide to the future. Octopus has been an investor in the business since 2007 and is currently its largest shareholder.

Staffline Group

As is to be expected, not all investments work out. One example is Staffline Group plc. 

Outsourcing specialist Staffline Group plc saw its shares suspended in 2019 following a 46.0% decline in its share price. This was due to a delay in releasing its full-year results following allegations of improper invoicing and payroll practices. Trading resumed in March 2019 following the company's refinancing, and while the company returned to profitability in FY 2021, a dividend has not been paid since dividend payments were suspended in 2019. 

Performance

The Octopus AIM Inheritance Tax Service was launched in June 2005. The chart below shows performance over five years compared with other AIM IHT portfolios available through Wealth Club. Like other IHT portfolios, this is a discretionary managed service so each portfolio is likely to be different. 

Five-year cumulative performance to 30 June 2022

The default view is the performance for this particular offer. You'll be able to see the performance of other AIM ISA offers if you click on the portfolio names above. Source: Octopus Investments and other AIM ISA managers. Compounded median monthly returns of all available Octopus AIM Inheritance Tax Service portfolios. Performance is shown net of fees, excluding initial charges, with dividends reinvested, based on the average portfolio performance across the service, except for Puma and Fundamental which shows the performance of one example portfolio. Past performance is not a guide to the future. Dividends are variable and not guaranteed.

Five-year discrete performance

AIM IHT portfolio YTD 2021 2020 2019 2018 2017 Five years to 30 June 2022
Octopus AIM IHT -28.2% 18.4% 0.5% 21.8% -20.6% 27.8% -9.9%

See five-year discrete performance comparison of all available AIM IHT portfolios

Source: AIM ISA managers (30 June 2022). Performance is shown net of fees, excluding initial charges, with dividends reinvested, based on the average portfolio performance across the service, except for Puma and Fundamental which shows the performance of one example portfolio. Past performance is not a guide to the future. Dividends are variable and not guaranteed.

Access to your investment

Investments in this portfolio are for the long term. However, if your circumstances change, you can sell some or all of your shares, although sometimes this can take a while depending on market conditions and liquidity. You can arrange to take regular withdrawals from the account, which you can change or stop at any time. Any amount you withdraw will of course no longer be IHT free and will lose its ISA tax benefits.

Risks – important

This, like all investments available through Wealth Club, is only for experienced investors happy to make their own investment decisions without advice.  Those considering AIM Inheritance Tax Portfolios should be comfortable with the significant risks of investing on AIM.

AIM IHT portfolios should only form part of a balanced portfolio. Your capital is at risk and you should not invest money you cannot afford to lose. The fewer the companies included in the portfolio, the higher the risk of loss if things don’t go to plan.

AIM stocks can be hard to sell, particularly at the smaller end of the market, and can be illiquid. AIM shares can be very volatile especially if the market falls sharply. The difference between the buying and selling price (spread) of AIM shares is often wider than the spread for shares listed on the main market. 

Eligibility for BPR, based on current rules, is assessed at the date of death and will depend on the companies in the portfolio remaining qualifying. Broadly speaking, you will need to have held a BPR qualifying stock for at least two years and still hold it on death to qualify. Tax rules can change and benefits depend on circumstances.

Before you invest, please carefully read the Risks and Commitments and the offer documents to ensure you fully understand the risks. 

This is the largest AIM IHT portfolio. The manager may find itself less able to act as quickly as smaller AIM ISA providers, which could impact the fund if market sentiment changes or if AIM rules change.

Charges (ISA)

A summary of the main charges and savings for an investment within an ISA is shown below. If you wish to invest outside an ISA, please see the provider's documents. The investment may have additional charges and expenses: please see the provider documents for more details. If you would like a full breakdown or a personal illustration, please let us know.

Full initial charge 1%
Wealth Club initial saving 0.25%
Net initial charge through Wealth Club 0.75%
Annual management charge 2%
Administration charge
Dealing fee 1%
Performance fee
Exit fee
All fees and charges are stated exclusive of VAT, which may be applicable in some cases.

See example of the total charges over 5 years

Our view

This is a longstanding portfolio managed by a well-resourced and experienced team. At £1.7 billion assets under management, it is the largest AIM IHT offering by some distance.

In our view, this scale has several advantages. Firstly, the level of funds under management should ensure the team has excellent access to AIM company management teams. Secondly, it should support a well-resourced investment team capable of producing the breadth of high-quality research needed to build an AIM portfolio. However, scale also has its disadvantages, the portfolio may be less nimble than its smaller peers, and some smaller company opportunities may be out of reach of the service.

If you’re an experienced investor looking for an AIM ISA, we believe the Octopus AIM service is worthy of consideration. It also has a minimum of £20,000 which could make it a contender for this year’s ISA subscription.

ISA: apply online or top up

See five-year performance of shares mentioned above

Wealth Club aims to make it easier for experienced investors to find information on – and apply for – investments. You should base your investment decision on the offer documents and ensure you have read and fully understand them before investing. The information on this webpage is a marketing communication. It is not advice or a personal or research recommendation to buy any of the investments mentioned, nor does it include any opinion as to the present or future value or price of these investments. It does not satisfy legal requirements promoting investment research independence and is thus not subject to prohibitions on dealing ahead of its dissemination. 

The details

Portfolio size
£1.7 billion
Average market cap
£734 million
Initial charge
1.0%
Saving via Wealth Club
0.25%
Net initial charge
0.75%
AMC
2.0%
Last updated: 4 August 2022

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