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 180 EIS-qualifying AIM-quoted investments and built a strong track record of returning funds to investors – realising over 110 investments to date (October 2022). Previous investments range from English sparkling wine producer Chapel Down to medical imaging group Polarean Imaging, which is seeking to improve MRI scans for lung disease (detailed below). 

The fund’s high level of realisations reflects the fact its AIM-quoted investments are comparatively more liquid than conventional EIS funds, 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 £5 billion of assets under management. 

• Target return of 1.3x (not guaranteed)
• Target portfolio of 10 or more AIM-quoted companies across a range of sectors
• Planned deployment in the 2023/24 tax year – not guaranteed

The manager

Guinness Asset Management was founded in 2003 and now manages £5 billion across 12 equity and multi-asset funds, two EIS funds, a VCT and an IHT fund (October 2022). 

The AIM EIS fund is managed by Andrew Martin Smith and Hugo Vaux. 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 2012 following spells as a macro-economic, corporate finance and investment analyst, and works across both the Guinness EIS and IHT funds. 

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 10 investment professionals.

Guinness Ventures has raised and invested over £255 million into more than 180 EIS and VCT-qualifying companies since 2010, including over £24 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 or other appointed nominee.

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 will generally sell shares after they have been held for three years (although, the manager can 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 2019/20, 2020/21 and 2021/22 tranches received portfolios of over 20 companies. 

The following market capitalisation and sector breakdowns are an example based on a client who invested in the 2020/21 and the 2021/22 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.

Northcoders Group – recent investment

Founded in 2015, Northcoders provides coding and software development training for businesses and individuals. The training is delivered online or in-person at one of Northcoders’s four regional support hubs via bootcamp courses, government-funded apprenticeships, and bespoke courses for individuals.

Since its founding in 2015, the business has grown revenues to more than £3.0 million, with year-on-year revenue growth of 117% in first half of 2022. The business has now seen more than 1,200 people graduate from its training programmes, and has grown to 86 full-time employees spread across its four hubs in Manchester, Leeds, Birmingham and Newcastle.

Guinness first backed the business at its IPO in July 2021 at 180p per share. It has since participated in its November 2022 placing at 300p. Past performance is not a guide to the future. 

Polarean Imaging

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 generated sales in excess of $1 million a year in the 2020 financial year.

Despite a difficult path through regulatory approval, with the application initially rejected, the FDA signed off the company’s technology for use in the diagnosis of lung disease in December 2022. 

The company believes it can now address a sizeable market in the US, where over 30 million people suffer from a chronic lung disease, with Polarean’s commercial team planning a rapid launch into the clinical market.

The Guinness AIM EIS Fund first invested in Polarean in March 2018, a position it has subsequently sold at a substantial gain, and provided further funding in 2020 and 2021. 

Audioboom – example of previous exit

Audioboom is a podcast publisher, connecting podcasters and advertisers with audiences through platforms like Apple Podcasts, Spotify and Amazon Music.

The Guinness AIM EIS Fund invested in the business in May 2019 as a part of a £2.8 million fundraising. The funds were intended to support the acquisition of new podcast content and the creation of new Audioboom Original content. 

At the time the company was generating annual revenues of $11.7 million from 1 billion advertising impressions. In the 12 months to 31 December 2021 the group reported revenues of $60.3 million, with more than 1 billion advertising impressions in the first quarter of 2022. 

The Guinness AIM EIS Fund sold part of its position three years after its first investment (May 2022) for 1.4x the value of its entire initial commitment. The fund continues to hold a portion of its original investment, which together with realisation proceeds is valued at 3.1x cost. Past performance is not a guide to the future.

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 in 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.

Performance

Since inception, the Guinness AIM EIS team has made over 180 EIS-qualifying AIM investments and has since realised more than 110 of them (October 2022). On average, those who invested between tax years 2014/15 – 2018/19 would have received around £125 in realised returns per £100 invested, with a remaining portfolio balance of £5. However, more recent tranches have struggled after 2022 saw AIM fall over 30%. 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 2021/22. 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. 

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. As a result, AIM shares may be more volatile, as market forces determine the price, whereas non-AIM EIS investments are usually valued by the investment manager. AIM shares could also 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.

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.

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

Charges 

Guinness will defer its fees until they can be paid from realisation 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. 

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 110 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.