The AIM turns eleven

The Alternative Investment Market, the London Stock Exchange's junior segment, had a happy 11th birthday this week. The market for small, fast-growing companies has established itself as "the world's most exciting nursery for business", according to Shares. It now boasts over 1,500 firms just 123 fewer than the main market.

In the first five months of 2006, Aim companies raised £7.3bn, more than three times the total in January to May last year itself a new record. Relatively low listing fees and light regulation have underpinned Aim's popularity; there is no need for firms to have a minimum market capitalisation or a track record before listing. Meanwhile, investors have been enticed by potentially quick returns if they back the right firm brokerage Corporate Synergy has jumped by 2,800% over three years, for instance and the scope for relief from capital gains tax and inheritance tax if they hold shares for more than two years. Aim has become the default choice for foreign companies seeking to raise money as the Nasdaq becomes hampered by stricter corporate governance regulation. Last year, Aim attracted 120 overseas firms, compared to the Nasdaq's 41. It has "stolen Nasdaq's lunch", says Iain Dey in The Sunday Telegraph.

As in all growth markets, however, there have been some high-profile crashes and worries over the quality of some of the companies floating. As a result, the LSE has tightened listing requirements for mining and oil groups, the hot sectors of the past few years.

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For investors, the key seems to be careful stock picking, as the market's overall returns over the longer term have been unspectacular. While the FTSE Aim All-Share index has gained 17% over the past year, compared to the FTSE 100's 15%, since 1995 the respective rises are 12% and 55%. Still, says Shares, with Aim's influence on the rise, it looks set to play "an increasingly important part in the portfolios of institutional and retail investors alike".