With the budget and the US election in the rear-view mirror, both episodes represent major clearing events for markets. In Rumsfeldian parlance, we are now dealing with a lot more “known knowns”, rather than “known unknowns” or even “unknown unknowns”. As a result, markets should enjoy something of a “clarity rally” given their famous distaste for uncertainty.
For AIM, the most obvious positive was not scrapping the valuable IHT relief entirely, with qualifying AIM shares attracting an IHT rate of 20% post April 2026. While AIM wasn’t included in the tax-free £1m threshold, we and other stakeholders are lobbying hard to overturn this, with a consultation period running to January 2025.
There could be considerable upside from the current position and, given the reasonably long lead-time until 2026, clients and advisers have time to diligently assess the options ahead of them. We are also cautiously optimistic AIM IHT services will be relevant for pensions that will be brought in scope for IHT from April 2027.
Notwithstanding the above, we believe investors will see the incoming 20% tax as requiring a higher hurdle rate of returns from their chosen AIM IHT manager. We expect far greater scrutiny of fund manager returns where the range between top and bottom performers is large, with performance often strongly negatively correlated with fund size.
After all, particularly on AIM, size is the enemy of returns. We remain structurally well-placed given our fund size, our focus on sub-£250m mkt. cap. companies, and our rare pledge to cap the fund’s capacity to maintain investment performance integrity.
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