Guinness AIM EIS
Update (6 April 2020): Offer closed
Please note, this offer is now closed. Any applications already submitted will be processed on a first come, first served basis.
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 inception in 2013, the fund has performed well.
It has invested in over 100 EIS-qualifying AIM-quoted companies and achieved 39 exits. Previous investments include English sparkling wine producer Chapel Down and music e-commerce retailer Gear4Music.Please remember past performance is not a guide to the future.
- 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 should maximise growth and aligns interests with those of investors
- Minimum investment £20,000 – you can apply online
Guinness Asset Management Ltd (“Guinness”) is one of the largest EIS fund managers operating in the UK. The business has raised £175 million across its EIS funds since 2010, of which £14 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.
Since then, the company has grown substantially and now has over £2.2 billion in assets under management. While much has changed, Mr Guinness is still involved in the business where he acts as Chief Investment Officer.
In total, Guinness has nine equity funds together with two EIS and two IHT funds. The AIM EIS fund is managed by Andrew Martin Smith, who also manages the Guinness Global Money Managers Fund and has been making small and unquoted company investments for many years. Andrew is supported by three co-managers – including Shane Gallwey, lead manager of the EIS fund – and the wider Guinness Ventures team.
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 per privately held EIS companies and the shares purchased must be new issues.
Guinness also has the flexibility to invest up to 20% in companies listed on NEX Exchange and pre-IPO businesses.
The fund targets an overall return of £1.30 per £1.00 invested, not guaranteed.
Guinness intends to exit investments after they have been held for three years, subject to market conditions. In certain circumstances, shares may be sold prior to the minimum three-year holding period, if conditions are right, which could have an impact on the tax relief. Guinness expects investor portfolios to be fully exited within 4 to 5 years, subject to market conditions.
AIM EIS offers 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 and should be able to sell shareholdings after three years and return capital to investors. Please note, shares in AIM can still be illiquid and hard to sell when compared with the main market. 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.
Guinness aims to invest in a portfolio of at least 10 companies, across a range of EIS-qualifying sectors.
The investment portfolio currently consists of 23 investments, with an average market cap of £29 million at the time of investment. The following market capitalisation and sector breakdowns are an illustrative example based on a client who invested in the 2018/19 tax year tranche.
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.
Polarean Imaging – recent investment
Polarean's technology produces hyperpolarized inert Xenon gas, used in conjunction with standard MRI to create high-resolution three-dimensional functional maps of the human lung.
This opportunity was brought to Guinness by Polarean Imaging’s broker in July 2019, and highlights the appeal of Guinness as a destination for small AIM-quoted stocks seeking funding. The Guinness team was made ‘insiders’ on the fundraise as Polarean Imaging was already an existing quoted company. The term “insiders” is used to highlight Guinness is likely to be in possession of private price sensitive information, on which it cannot act, this is typical for institutional investors who are looking to support a share Placing.
Guinness subsequently invested in the business as part of a £2.1 million Placing to support the company’s clinical trials in the US and help fund the new drug application submission to the US Food and Drug Agency.
In January 2020 the company announced positive clinical results for its phase III trials. The shares have risen from an investment price of 18p to a share price of 31p as at 31 January 2020 – note past performance is not a guide to the future.
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 29 February 2020, the share price was 165.5p per share.
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 – 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 at £7 per share, generating a 5x return for EIS investors, before tax relief.
Since inception to June 2019 the Guinness AIM EIS team has made over 100 EIS-qualifying AIM investments and achieved 39 exits, with an aggregate return of 1.27x the amount invested (not including charges or EIS income tax relief). Please note past performance is no guide to the future. The chart below shows the valuation as at 31 December 2019, had you invested £100 in each tax year.
Source: Guinness Asset Management, as at 31 December 2019. 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 2015/16, the total return including initial tax relief would be £136.73, 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.
Guinness will defer its fees until they can be paid from exit proceeds – in our view a positive move 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 has a closing date of 6 April 2020. Guinness will look to invest in at least 10 EIS-qualifying companies in the 12 months following close. Investors should be eligible for EIS income tax relief in the 2020/21 tax year or can choose to carry back to the 2019/20 tax year.
The Guinness AIM EIS fund is the only purely AIM EIS offer currently available to investors. Guinness will look to invest in a portfolio of at least 10 EIS-qualifying companies.
There are, of course, drawbacks to a strategy which chooses to limit its opportunity to EIS-qualifying new issues on AIM, but considerable advantages too. The liquidity of the AIM market provides the scope for enhanced exit opportunities, and AIM companies are subject to more oversight and governance than perhaps an unquoted company.
The Guinness AIM EIS fund has a good track record of realised returns. Since its inception, it has made over 100 EIS-qualifying AIM investments and made 39 exits, achieving an aggregate return of 1.27x the amount invested. The exit track record is good too, in our view. Looking at £100 invested in each tax year, investors in tax years 2014/15 and 2015/16 receiving more than £100 back in cash returns, within a relatively short holding period. The 2016/17 offer has returned more than half of investors’ initial subscriptions. Please note, past performance is not a guide to the future.
For investors seeking EIS exposure to AIM this offer could be a worthy consideration, providing there is adequate market liquidity and a good number of quality new AIM issues each year.
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.
- Target return
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- Minimum investment