Guinness AIM EIS

Offer closed

As at 6 April 2022, the Guinness AIM EIS closed. 

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The Guinness AIM EIS fund is managed by an experienced team and backed by an established parent company, Guinness Asset Management. 

Since launching in 2014, the service has made over 160 EIS-qualifying AIM-quoted investments and has built a track record of returning funds to investors, having sold 90 of these investments to date (September 2021). Previous investments include English sparkling wine producer Chapel Down and medical imaging group Polarean Imaging, which is seeking to improve MRI scans for lung disease. 

Important: The information on this website is for experienced investors. It is not advice nor a research or 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, so you could get back less than you invest.


Highlights

  • 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 before tax relief (not guaranteed)
  • Guinness defers its fees until exit, which could maximise growth and aligns interests with those of investors
  • Minimum investment £20,000

The manager

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 over £21 million has been 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.

The company now has £4.1 billion in assets under management (September 2021). While much has changed, Mr Guinness is still involved in the business as Chief Investment Officer.

In total, Guinness has 11 equity funds as well as two EIS and specialist IHT funds. The AIM EIS fund is managed by Andrew Martin Smith. Previously Chief Executive of Hambros Fund Management when it merged with Guinness Flight in 1997, 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 two co-managers – including Shane Gallwey, lead manager of the EIS fund – and the wider Guinness Ventures team.

Meet the manager: watch a video interview with Andrew Martin Smith

 

Investment strategy

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

According to Guinness, 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.

Target return

The fund targets an overall return of £1.30 per £1.00 invested, not guaranteed, excluding tax relief.

Exit strategy

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. 

Portfolio

Guinness aims to invest in a portfolio of at least 10 EIS-qualifying companies, across a range of sectors. Investors in the 2019/20 and 2020/21 tranches received a portfolio of 21 investee companies. 

The following market capitalisation and sector breakdowns are an 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.

Sample portfolio: sector breakdown by investment cost (%)

Sample portfolio: market capitalisation breakdown by investment cost (%)

Source: Guinness Asset Management, 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.  

Polarean – Guinness AIM EISPolarean Imaging – recent investment

Polarean Imaging has developed a new way of using MRI scanners to assess lung health using hyperpolarised Xenon gas. 

The technology can be used to improve diagnosis and support the treatment of diseases such as COPD, emphysema, bronchitis and asthma. Polarean sells the equipment necessary to apply the process, and already generates sales in excess of $1 million a year – mostly to researchers.

The new process completed Phase III trials in 2020 and was submitted to the US Food & Drug Administration for approval in December 2020. This was followed by significant share price gains. However, the submission was subsequently rejected, due to technical and manufacturing issues, hitting the shares hard. Management believes the issues can be resolved, and the company can fund the necessary work out of existing cash resources. 

The Guinness AIM EIS fund first invested in Polarean in March 2018 and provided further funding in 2020 and 2021. 

The British Honey Company – Guinness AIM EISThe British Honey Company

The British Honey Company began trading in 2014. It initially focused on honey production but more recently has diversified into honey-infused spirits. Today it produces 13 different honey products and 16 spirits. These are mostly sold under the KEEPR’s brand, but also a number of acquired and licensed brands – including English Heritage, The London Distillery and Two Birds.

Sales have grown rapidly, nearly tripling in the first half of 2021 to just short of £3 million. That reflects several acquisitions, the cost of which also hit margins in the half. Sales have benefited from an increased presence on e-commerce sites like Amazon, Ocado and Masters of Malt, accounting for 18% of the overall 2020 revenues. The success of the group’s online sales, largely driven by proprietary technology, has led it to look at offering similar services to third parties.

The Guinness AIM EIS fund first invested in the business in March 2020, with further funding provided in February 2021 to support the acquisition of Union distillers.

Access Intelligence – Guinness AIM EISAccess Intelligence – example of previous exit

Access Intelligence provides Software as a Service (SaaS) tools to the marketing and PR industries. 

Its products include media monitoring tool Vuelio and social media listening platform Pulsar, with 6,000 clients using its products every day. They seek to provide companies with a “single, real-time view of reputation”, allowing companies to gauge the effects of events and engagement efforts on different audiences. 

The group’s most recent set of results, covering the 6 months to 30 May 2021, saw revenues rise 17% to £11.0 million, with contracted sales rising even faster. Much of that growth is down to expansion in North America and the Asia Pacific region, where the company has picked up several blue-chip clients. 

Guinness AIM EIS initially invested £34,000 in the business in May 2018 and has since sold its stake, generating proceeds of £114,800.

Fishing Republic – example of previous failure

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).

Performance

Since inception, the Guinness AIM EIS team has made over 160 EIS-qualifying AIM investments and has since realised 90 of them (September 2021). On average, those who have been invested between tax years 2014/15 – 2018/19 would have received £94 in realised returns per £100 invested, with a remaining portfolio balance of £31.

More recent tax year tranche portfolios appear to have benefitted from an improvement in market conditions for AIM, in particular from the exposure to healthcare and technology sectors.

Performance per £100 invested in each tax year

Source: Guinness Asset Management, as at 31 October 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; equally, there may be circumstances where Guinness sells holdings within three years and thus tax relief may be lost.

Charges 

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.

Investor charges
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) 0.2%
Performance fee 20%
Investee company charges
Initial charge
Annual charge
All fees and charges are stated exclusive of VAT, which may be applicable in some cases. Any fees and charges payable by the investee companies or the underlying businesses do not directly come out of your investment. However, they will effectively reduce the returns generated by investee companies and therefore impact your investment.

More detail on the charges

Timing of the offer

This offer is now closed. 

Our view

The Guinness AIM EIS 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 unquoted companies. 

Since its launch in 2014, the fund has sold more than 90 of its 160 investments in earlier tranches and returned significant cash to investors. Recent tax year tranche portfolios have benefited from high exposure to technology and healthcare sectors, which found favour following the onset of the pandemic. Past performance is not a guide to future returns. 

Wealth Club aims to make it easier for experienced investors to find information on – and apply for – tax-efficient investments. You should base your investment decision on the provider's documents and ensure you have read and fully understand them before investing. This review is a marketing communication. It is not advice or a personal or research recommendation to buy the investment mentioned. 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

Type
Fund
Sector
AIM
Target return
-
Funds raised / sought
-
Minimum investment
-
Deadline
CLOSED
Last updated: 10 January 2022

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