Data from Financial Express shows that the FTSE AIM Index outperformed the FTSE 100, FTSE All Share and FTSE World Indices, returning 60.64 per cent over one year to 26 April 2010. This is compared to the FTSE 100, which returned 43.79 per cent, the FTSE All Share which returned 44.47 per cent and the FTSE World which returned 38.31 per cent.
Performance of indices over 1-yr
Source: Financial Express Analytics
So what is the best way to gain exposure to AIM stocks?
UK retail investors have a number of choices, either via a Venture Capital Trust (VCT) or via an IMA Smaller Companies fund. Data from Financial Express suggests there are 10 VCTs within the IT VCT AIM Quoted sector, which specifically invest in companies listed on the FTSE AIM Index.
Over a one year period to 26 April 2010 the sector returned 37.97 per cent, with the best performance coming from the Unicorn Asset Management Unicorn AIM VCT which returned 107.70 per cent over a one year period.
Further analysis shows that there are 66 funds within the IMA Smaller Companies sector. During the same period the sector returned 46.61 per cent, with the best performance coming from the Close Special Situations fund which returned 108.36 per cent.
The general rule of thumb is that AIM stocks are considered to be more risky than those stocks listed on the main FTSE Index. However, data from Financial Express does not support this.
Over a one year period the IT VCT AIM Quoted sector saw volatility of 8.67 per cent compared to the IMA UK Smaller Companies sector which saw volatility of 12.36 per cent. In addition the FTSE AIM Index saw volatility of 16.09 per cent compared to the FTSE 100's 16.74 per cent, and the FTSE All Share Index's 16.66 per cent.
Trustnet Alpha Manager, Giles Hargreave who manages the Marlborough Special Situations fund and the Marlborough UK Micro Cap Growth fund does not believe AIM stocks are particularly volatile and says investors can do extremely well with AIM stocks in a good market.
Harry Nimmo, also a Trustnet Alpha Manager, believes the strong performance in the AIM Index is down to the recent resurgence of resources.
"Mining, oil and gas sectors make up about 37 per cent of the AIM market. One of the big stories has been the resurgence of oil and gas, which has driven both the FTSE AIM Index and the FTSE 100 Index," he says.
Nimmo, who manages the Standard Life Investments UK Smaller Companies fund, says he tries to keep AIM stocks to 25 per cent of the portfolio and says his two largest holdings – ASOS and ABCAM are both AIM stocks.
He also states there is a lot of overseas business on AIM, especially from China and India and says the strong performance from the BRIC markets could have played a part in making the FTSE AIM Index so strong.
Aegon's Elaine Morgan, another Trustnet Alpha Manager, agrees the high exposure to commodity prices through oil and gas and mining has helped the AIM Index outperform as has the high international content.
Morgan, who manages the Aegon UK Smaller Companies fund, also points to a more depressed valuation at the outset as a key factor in the AIM index outperforming other indices.
She also rates ABCAM and has a 2.90 per cent holding in the company.
"The company has delivered high revenue growth due to the increasing use of antibodies, the expanding range of products, the quality of information they provide to customers through their online platform and increased geographical distribution," she says.
Meanwhile Hargreave is a fan of Advanced Medical which develops and manufactures products in the woundcare market.
"The company has a very good growth record, very experienced management and it is building itself from a very low base. This is the sort of company that you would refer to as a company who has benefited from being on AIM and demonstrates what AIM can do for the British industry generally," he says.