Guinness AIM EIS

Guinness AIM EIS invests mostly in publicly traded businesses, particularly those quoted on AIM. 

Since launching in 2014, the service has made over 200 EIS-qualifying AIM-quoted investments and realised over 130 to date (December 2023), building a strong track record of returning funds to investors. Previous investments range from English sparkling wine producer Chapel Down to transport technology provider Aurrigo International.

The fund’s high level of realisations reflects the fact investments in AIM-quoted companies are comparatively more liquid than those in private companies, making sales easier. 

The fund is managed by an experienced Ventures team and backed by an established parent company, Guinness Asset Management, which has around £7.5 billion of assets under management. 

• Target return of 1.3x over four to five years (not guaranteed)
  
• Target portfolio of 10 or more AIM-quoted companies across a range of sectors

The manager

Guinness Asset Management was founded in 2003 and now manages £7.5 billion across its equity and multi-asset funds, two EIS funds, a VCT and an IHT fund (December 2023). 

The AIM EIS fund is managed by Andrew Martin Smith and Hugo Vaux supported by analyst George Whear. 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. Hugo joined Guinness in 2013 following spells as a macro-economic, corporate finance and investment analyst, and works across both the Guinness EIS and VCT. 

The fund can draw on support from the wider Guinness Ventures team. Established in 2010 and led by Shane Gallwey, a Chartered Financial Analyst, the team includes 11 investment professionals.

Guinness Ventures has raised and invested over £300 million across its EIS funds since 2010, including over £32 million through the Guinness AIM EIS fund.

Before your subscription is invested, the cash will be held by the custodian, Mainspring Nominees Limited. Shares will be held by the nominee, GAM MNL Nominees Limited.

Investment strategy

The Guinness AIM EIS fund seeks to invest in at least 10 EIS-qualifying companies across a range of sectors, 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.

The same EIS-qualifying criteria apply to companies quoted on AIM as they do to private companies. The shares purchased must be new issues, although the fund will target a mix of IPOs and follow-on offers from existing quoted businesses, helping to diversify investors’ portfolios. 

Guinness also has the flexibility to invest up to 20% in companies quoted on AQUIS Exchange and in pre-IPO businesses. 

The manager generally expects to sell shares within four to five years of making an investment (although, it use its discretion – or may be forced to – sell before the minimum three-year holding period required to retain EIS tax relief). Investors should also note that, because their shares are publicly traded, the companies in which the Guinness AIM EIS fund invests will typically be more volatile than those in a conventional EIS fund.

Portfolio

Guinness aims to invest in a portfolio of at least 10 EIS-qualifying companies, across a range of sectors. Investors in the 2020/21, 2021/22, and 2022/23 tranches received portfolios on average of over 20 companies. 

The following market capitalisation and sector breakdowns are an example based on a client who invested in the 2021/22 and the 2022/23 tax year tranches. Please note new investors’ portfolios will include companies issuing new EIS-qualifying shares over the coming tax year and may therefore differ significantly to those shown below.

Sample portfolio: sector breakdown by investment cost (%)

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

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 could be different.

Eden Research – recent investment

In September 2023, the EU Commission adopted a raft of regulations against microplastic products – including controlled-release fertilisers and pesticides. 

These products coat active substances with a thin layer of polymer to control the release of nutrients over time. However, the capsules are non-biodegradable and directly contribute to microplastic pollution and soil contamination. 

In contrast, Eden Research’s technology, Sustaine®, is a naturally sourced microcapsule derived from yeast which allows for phased release. Its product is plastic-free, biodegradable, and has proven efficacy.

Sustaine® has been commercialised in two agrochemical products with a third, Ecovelex™, achieving its first sales in 2024. Eden Research believes it offers one of the only non-plastic encapsulation technologies immediately available to the market. 

The Guinness AIM EIS fund first invested £95,000 in April 2016 and subsequently sold its position. Since then, it has since invested twice more, most recently in October 2023. 

Aurrigo International

Aurrigo designs, engineers, manufactures and supplies specialist products and autonomous vehicles to the automotive, aviation and transport industries.

The group has an established automotive technology division has multi-year contracts with clients including Aston Martin Lagonda, Jaguar Land Rover, and McLaren, providing the group with good revenue visibility.

In 2016, Aurrigo launched a new division to produce autonomous vehicles, primarily for the aviation industry – from a road-legal shuttle to a baggage dolly. In 2023, Aurrigo announced a multi-year partnership with Changi Airport Group (Singapore) for the continued development of two of its vehicles as well as its software platform. Further trials are being conducted at airports around the world, including Amsterdam Airport Schiphol, Munich International Airport, and Cincinnati/Northern Kentucky International Airport.

The Guinness AIM EIS fund has invested £500,000 across two rounds, most recently in November 2023. The holding is currently valued at £791,000 – past performance is not a guide to the future. 

Polarean Imaging – example of previous exit

Polarean Imaging 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 generated sales in excess of $1 million a year in FY 2022. 

Polarean's share price increased significantly in the two years to October 2021. However, in September 2021 the FDA rejected the company’s initial application for regulatory approval. Despite this decision being reversed in December 2022, the shares never recovered and have since fallen by more than 90% from its October 2021 high.

The Guinness AIM EIS Fund first invested in Polarean in March 2018 and provided further funding in 2019, 2020 and 2021, for a total investment cost of c.£670,000. Two positions have been fully exited generating returns of 4.4x and 4.1x, one partially exited (2.3x), and one is held at a loss – past performance is not a guide to the future.

Osirium Technologies – example of previous failure

As with any early-stage investment, not all will work out as planned. One example is Osirium Technologies ("Osirium").

Osirium was a cybersecurity company. Despite increasing revenues and a growing client book, the company struggled to achieve the critical mass necessary to compete with more established vendors. In August 2023, the company announced it was to be acquired by SailPoint Technologies UK, a leading provider of identity security solutions. 

The Guinness AIM EIS Fund invested £157,000. Following the acquisition, it received c.£14,000 in proceeds, representing a 0.1x return for investors.  

Performance

Since inception, the Guinness AIM EIS team has made over 200 EIS-qualifying AIM investments and has since realised more than 130 of them (December 2023). On average, those who invested between tax years 2014/15 – 2019/20 would have received around £125 in realised returns per £100 invested, with a remaining portfolio balance of £4. However, more recent tranches have struggled after 2022 saw AIM fall over 30%. While more recent performance has been less turbulent, the market fell 6.4% in the year to December 2023. Please note, past performance is no guide to the future.

The chart below shows the average performance of the total subscribed into the funds in each full tax year from 2012/13 (or from when the current strategy was adopted if later) to 2022/23. The chart is based on the latest valuations provided by the manager, expressed on a £100 invested basis. Please note, individual investor portfolios’ performance will deviate from the average.

Performance per £100 invested in each tax year

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 and should only form part of a balanced portfolio. As must be expected with early-stage investments, some or even all of the companies in the portfolio could fail: the fewer the companies included in the portfolio, the higher the risk of loss if things don’t go to plan. You should not invest money you cannot afford to lose.

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.

To claim tax relief, you will need EIS3 certificates, normally issued once shares have been allotted. This can take several months: please check the deployment timescales carefully. Tax reliefs depend on the portfolio companies maintaining their EIS-qualifying status. Remember, tax rules can change and benefits depend on circumstances.

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. 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.

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

Charges 

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. 

Our view

The Guinness AIM EIS will look to invest in a portfolio of at least 10 EIS-qualifying, predominantly AIM quoted, 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 AIM provides scope for enhanced realisation opportunities, and AIM companies are usually subject to more oversight and governance than unquoted companies. 

Since its launch in 2014, the fund has sold more than 130 of its over 180 investments and returned significant cash to investors. Recent tranches have struggled though, as AIM lost ground in 2022. 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 – 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.