Guinness AIM EIS
The Guinness AIM EIS fund is currently the only EIS offer that focuses solely on AIM.
The fund is managed by an experienced team and is backed by an established parent company, Guinness Asset Management.
Since launching in 2014, the service has made over 130 EIS-qualifying AIM-quoted investments and has built a track record of returning funds to investors, having sold 68 of these investments to date. Previous investments include English sparkling wine producer Chapel Down and small biotech business Synairgen, which is developing a drug to treat Covid-19. Please remember past performance is not a guide to the future.
The offer has a closing date of 6 April 2021. Guinness will look to invest in at least 10 EIS-qualifying companies over the course of the 2021/22 tax year, so investors should be able to claim EIS income tax relief for 2021/22 and/or carry back to 2020/21.
- Target portfolio of 10 or more AIM-quoted companies across a range of sectors
- Target return of £1.30 per £1 invested net of fees and excluding tax relief (not guaranteed)
- Guinness defers its fees until exit, which could maximise growth and aligns interests with those of investors
- Planned deployment in the 2021/22 tax year – not guaranteed
- Minimum investment £20,000
Guinness Asset Management Ltd (“Guinness”) is one of the largest EIS fund managers. It has raised £200 million across its EIS funds since 2010, of which £22 million is invested within the Guinness AIM EIS fund.
An industry stalwart, Tim Guinness has over 35 years’ investment experience. He co-founded and ran Guinness Flight Global Asset Management until its acquisition by Investec in 1998. Following this, he led Investec’s Global Energy Fund before launching Guinness Asset Management in 2003.
Now the company has over £2.4 billion in assets under management. While much has changed, Mr Guinness is still involved in the business as Chief Investment Officer.
In total, Guinness has nine equity funds as well as two EIS and two IHT funds. The AIM EIS fund is managed by Andrew Martin Smith. Previously Chief Executive of Hambros Fund Management, Andrew has over forty years’ experience in the financial services industry. In addition to being lead fund manager on the AIM EIS service Andrew serves as a non-executive director of Church House Investment Management. Andrew is supported by three co-managers – including Shane Gallwey, lead manager of the EIS fund – and the wider Guinness Ventures team.
Watch a video interview with manager Andrew Martin Smith:
The Guinness AIM EIS fund seeks to invest in at least 10 companies across a range of EIS-qualifying sectors.
The fund will look to make investments in companies which:
- Operate within a growing sector and with a sound business plan
- Are not overly reliant on a small customer base
- Have experienced management teams with incentives aligned with shareholders
- Have demonstrable regard for effective corporate governance
Guinness states the number of EIS-qualifying deals on AIM per year has varied between approximately 50 and 100 – a mix of IPOs and follow-on offers from existing quoted businesses. The same EIS-qualifying criteria apply to companies quoted on AIM as they do to privately held EIS companies. The shares purchased must be new issues.
Guinness also has the flexibility to invest up to 20% in companies quoted on AQUIS (previously NEX) Exchange and in pre-IPO businesses.
The fund targets an overall return of £1.30 per £1.00 invested, not guaranteed, excluding tax relief.
AIM EIS offers could have an advantage over non-AIM EIS offers when it comes to exit. Providing there is adequate market liquidity, Guinness will have some control over the timing of the exit.
Guinness intends to sell shareholdings after three years and return capital to investors, with investor portfolios fully exited within 4 to 5 years – not guaranteed.
Please note, shares in AIM, whilst comparatively more liquid than those in unquoted companies, can still be hard to sell when compared with main market shares. They can also be volatile, as market forces determine the price, whereas non-AIM EIS investments are usually valued by the investment manager or a third party twice a year.
Important: to manage risk within the portfolio, maintain a diversified portfolio, and reduce concentration, the manager may see fit to realise strong performing investments early. This may result in the loss of some of the initial tax relief if sales occur within the three-year EIS minimum holding period.
Guinness aims to invest in a portfolio of at least 10 EIS-qualifying companies, across a range of sectors. Investors in the 2019/20 tranche received a portfolio of 20 investee companies across 21 investments. To date, investors in the 2020/21 tranche have received a portfolio of 15 investee companies (March 2021).
The following market capitalisation and sector breakdowns are an illustrative example based on a client who invested in the 2019/20 and the 2020/21 tax year tranches. Please note new investors’ portfolios will be constructed from companies issuing new EIS qualifying shares over the coming tax year. Future investment portfolios may therefore differ significantly to those shown below.
Source: Wealth Club, Morningstar. Correct as at the time of each investment.
The companies outlined below are historic investments made by the Guinness AIM EIS fund in its previous iterations and give a flavour of the types of companies a new investor might expect. EIS funds tend to be managed on a discretionary basis so each individual portfolio is likely to be different.
One Media iP Group - recent investment
One Media iP Group is a digital music rights acquirer, publisher and distributor. The Group specialises in purchasing and monetising intellectual property rights with proven, recurring income streams. One Media adds value to its content by maximising its availability in over 600 digital stores globally, including Apple Music, YouTube, Amazon and Spotify.
Guinness AIM EIS invested in the business in September 2020 in an investment round that raised £5.6 million. The proceeds will be used by the Company to fund its Harmony iP programme. This enables rights owners to capitalise on their future earnings. Harmony iP exchanges exclusive rights to create and expand the rights owner’s digital assets, in return for a lump sum payment, calculated as a percentage of the agreed total value of the relevant intellectual property. The rights owner will continue to receive royalties for their remaining portion of rights held.
Creo Medical creates medical devices for the emerging field of surgical endoscopy, i.e. minimally invasive surgery. The company's technology makes it possible to conduct endoscopic surgery by enabling miniature endoscopic devices to cut, coagulate and ablate with precision.
Guinness AIM EIS first invested in the business in December 2016 in its initial public offering, which raised £20 million at a price of 76p per share. The proceeds were to be used to further develop the product range and advance its development pipeline. Guinness supported the business again in a placing in August 2018 at 125p per share and subsequently realised 76% of its initial 2016 investment for an average price of 176p. As of 30 September 2020, the share price was 170p per share. Past performance is not a guide to the future.
As with any early-stage investment, not all will work out as planned. One example is Fishing Republic.
The company was, at one point, the largest fishing tackle retailer in the UK and listed on AIM in 2015. It grew to over 14 stores nationwide and ran its own distribution centre out of Rotherham to support online clients.
Despite this, the company suffered heavy losses in 2018 as a result of ‘strong competitive pressures’. The shares were suspended in October 2018 and the company entered administration two months later.
The Guinness AIM EIS fund had invested £130,000 into the business and this was written down to nil although investors were able to claim loss relief on the full investment amount (excluding initial tax relief).
Gear4Music Plc – example of a previous exit
Gear4Music Plc is a UK-based online retailer of musical instruments and music equipment, operating from an office, showroom, and distribution centre in York. The company offers over 1,500 products from a range of brands, including its own.
Guinness invested in the business in June 2015 as part of Gear4Music’s initial public offering, which raised total net proceeds of £9 million. The proceeds helped transform the business by developing an e-commerce platform, accelerating marketing activities, building a new London showroom, and repaying £4.4 million of loan notes.
In the following three years, the business grew revenues from £24 million to £80 million in the 12 months to February 2018. Guinness exited the business by selling shares through the market, generating a 5x return for EIS investors, before tax relief.
Since inception the Guinness AIM EIS team has made over 130 EIS-qualifying AIM investments and has since realised 68 of these investments (Feb 2021). On average, for tax years 2014/15 – 2016/17, investors have received £94 in realised returns per £100 invested, with a remaining portfolio balance of £8. More recent tax years appear to have benefitted from an improvement in market conditions for AIM, although returns remain largely unrealised.
Source: Guinness Asset Management, as at 31 January 2021. Figures are net of all fees. Past performance is no guide to future performance. These figures do not include any realised returns which would be available through loss relief. In the above examples, initial tax relief of up to 30% could also apply. So, for the tax year 2017/18, the total return including initial tax relief would be £137, remember tax rules can change and tax benefits depend on circumstances. Please note, in some circumstances investments may be realised within the minimum three-year holding period, so they no longer qualify for EIS tax relief.
Risks – important
This, like all investments available through Wealth Club, is only for experienced investors happy to make their own investment decisions without advice. EIS investments are high-risk so should only form part of a balanced portfolio and you should not invest money you cannot afford to lose. They also tend to be illiquid and hard to sell and value. Before you invest, please carefully read the Risks and Commitments and the offer documents to ensure you fully understand the risks.
Tax rules can change and benefits depend on circumstances.
This EIS fund invests in early-stage businesses which are more likely to fail than larger ones. So you should expect a number of failures in the portfolio, or even be prepared for all companies to fail.
There is a limited choice in the universe of AIM stocks that meet EIS qualification rules. As the price of an AIM business is driven by the market, the manager doesn’t have the same scope to negotiate entry price compared to unquoted shares.
AIM shares could suffer extreme volatility if the market falls sharply. The difference between the buying and selling price of AIM-quoted companies is often wider than those on the main market.
Exits could take longer than three years.
Guinness will defer its fees until they can be paid from exit proceeds – which could enhance returns and maximise tax relief. It puts the interests of its investors first and creates alignment of interests.
A summary of the main charges and savings is shown below. Some of these will be payable by the investor, whilst others by the investee companies. The investment may have additional charges and expenses: please see the provider documents, including the Key Information Document, for more details.
|Full initial charge||5%|
|Wealth Club initial saving||0.5%|
|Net initial charge through Wealth Club||4.5%||Annual management charge||1.75%|
|Administration charge (not deferred)||0.35%|
|Performance fee||20%||Investee company charges|
More detail on the charges
Timing of the offer
The offer is now closed.
The Guinness AIM EIS fund is the only wholly AIM-focused EIS offer currently available to investors. Guinness will look to invest in a portfolio of at least 10 EIS-qualifying companies, although historically the number of holdings has been greater than 20.
There are, of course, drawbacks to a strategy that chooses to limit its opportunities to EIS-qualifying new issues on AIM, but advantages too. The liquidity of the AIM market provides scope for enhanced exit opportunities, and AIM companies are subject to more oversight and governance than perhaps an unquoted company.
Indeed, since its launch in 2014, the fund has sold 68 of its 130 investments in earlier tranches and returned significant cash to investors. More recent tax year tranches appear to have participated in the uplift in sentiment towards the AIM market, although returns remain largely unrealised. Please note, past performance is not a guide to the future.
See five-year performance of shares mentioned above
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