Is there an AIM ETF or AIM tracker fund?

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Is there an AIM ETF or tracker fund? The short answer is no. But, there are other ways of getting low cost exposure to UK small cap companies. 

In this guide our team of finance professionals explain what the AIM is, what an ETF is and pick out some alternatives to an AIM tracker fund.

This article is written by Talal, who is a CFA-qualified former institutional investment advisor and private equity associate. He used to advise clients with at least £1 billion to invest, so you’re in safe hands.

Table of Contents

AIM ETF Alternatives

There are no ETFs (Exchange Traded Funds) which seek to fully replicate the Alternative Investment Market (AIM), nor its main indices (more on these below).

But, there are alternatives to AIM tracker funds that have a similar investment profile.

We’ve picked out two ETFs that seek to track the performance of small cap UK companies. However, we make no statement on whether or not you should invest in them yourself.

Both ETFs are available with InvestEngine, our recommended best ETF platform in the UK for ISAs.

iShares MSCI UK Small Cap UCITS ETF

ISIN: IE00B3VWLG82
Ongoing charges: 0.58%
2023 performance: +9.15%

This is an ETF which tracks the MSCI UK Small Cap Index. So, it focuses on the smaller UK listed companies but does not cover the AIM market.

It does give exposure to the smaller end of listed UK companies, though.

Amundi Prime UK Mid and Small Cap UCITS ETF

ISIN: LU2182388152
Ongoing charges: 0.05%
2023 performance: +7.37%

This ETF aims to track the performance of the largest 150 companies (excluding investment trusts) from the mid and small cap segment of the London Stock Exchange.

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OFFER: Use our exclusive link to get a free welcome bonus of up to £50 AND an additional bonus of up to £2,500 when you invest or transfer an ISA at InvestEngine.

Ts&Cs apply. Capital at risk if you invest.

AIM ETF Fund Alternatives

For a more targeted investment in AIM companies, there are several mutual funds and investment trusts which specifically invest in AIM listed stocks.

We’ve picked out two below. For more, read our full guide to AIM funds.

Important note: we have picked the funds below as examples of funds that give you exposure to the AIM market, not because we think you should invest in them. This article should not be considered financial advice.

Abrdn UK Smaller Companies Growth Trust plc

ISIN: GB0002959582
Fund type: Investment trust
Ongoing charges: 1.15%
2023 performance: +1.91%

This is an investment trust, meaning it’s a type of fund that is itself listed on a stock market. 

It invests in small cap UK companies and is benchmarked against the Deutsche Numis Smaller Companies plus AIM (ex investment companies) Index. More on this index later.

Abrdn UK Smaller Companies Growth Trust plc therefore invests in AIM companies and will give you exposure to the AIM if you invest in it.

Over the last 12 months (March-23 to March-24) it’s traded at an average discount of 13.45% compared to its Net Asset Value (NAV). 

This is an example of what is sometimes referred to as the ‘double discount’ on small UK shares. 

In the past few years, private equity firms and international companies have paid huge premiums when acquiring smaller listed UK companies. 

Some acquisitions have seen prices paid far in excess of the company’s share price. There’s a view that smaller UK firm’s share prices undervalue the companies. 

In addition to this, investment trusts – which, remember, are themselves listed companies – which focus on UK small cap companies also tend to trade at a discount. As we mentioned, the Abrdn UK Smaller Companies Growth Trust plc traded at an average discount of 13.45% in the past year.

So, in theory, by investing in smaller UK listed companies through an investment trust which is trading at a discount, you are buying undervalued shares (the first discount) through an undervalued fund (the second discount). 

For this to be a worthwhile play, though, these discounts must ‘correct’ themselves and reach a ‘fair’ value. Clearly, this can happen on an individual basis when a particular company gets acquired. When, or if, the wider UK small cap market achieves a ‘fair’ value is the key question.

Schroder UK Dynamic Smaller Companies Fund

ISIN: GB0031092942
Fund type: Mutual fund (unit trust)
Ongoing charges: 1.67%
2023 performance: -7.68%

The Schroder UK Dynamic Smaller Companies Fund is a mutual fund (open-ended investment company).

Rather than being traded on a stock exchange, mutual funds issue investors with ‘units’ which represent their stake in the fund in proportion to the size of their investments. Sometimes, mutual funds are referred to as unit trusts.

Schroder’s UK Dynamic Smaller Companies Fund seeks to invest in smaller companies, many of which are listed on the Alternative Investment Market. 

The Schroder UK Dynamic Smaller Companies fund on Interactive Investor

The fund is benchmarked against Numis Small Companies Plus AIM excluding Investment Companies Total Return GBP index. That’s a bit of a mouthful – we explain what this is later in this article.

For investing in mutual funds and investment trusts we recommend Interactive Investor.

Interactive Investor

Interactive Investor has more than 40,000 shares, bonds and funds to invest in. There’s also a range of investment ideas and funds lists to help you decide what to invest in.

Plus, dealing fees are lower than the other major ISA providers and regular monthly investing is free. It also has great customer feedback.

Interactive Investor is regulated by the FCA and has FSCS protection.

How to buy AIM shares

Instead of an AIM ETF, you could buy AIM shares directly. You’ll need to use an investment platform that provides access to them, though.

Many UK brokers focus on providing shares listed on the main LSE market – not all cover AIM shares.

But, Interactive Investor does and at a low price compared to other brokers. It’s our top pick for buying AIM shares.

Interactive Investor

Due to its monthly subscription pricing instead of charging as a percentage of your portfolio, Interactive Investor is one of the lowest cost ISA providers for large amounts. Fees stay the same even as your portfolio grows in size.

It has more than 40,000 shares, bonds and funds to invest in. There’s also a range of investment ideas and funds lists to help you decide what to invest in. Plus, dealing fees are lower than the other major ISA providers and regular monthly investing is free.

Interactive Investor has an ‘excellent’ Trustpilot rating of 4.7 and gets great customer feedback. Its customer support wait time averages under 1 minute, so help is on hand quickly if you need it.

Interactive Investor is regulated by the FCA and has FSCS protection.

Read our full guide on how to buy AIM shares for more info.

What is the AIM?

The Alternative Investment Market (AIM) is a sub-market of the London Stock Exchange (LSE).

It’s geared towards smaller and high-growth businesses. Prior to 1995 it was known as the Unlisted Securities Market.

Companies listed on the AIM face fewer regulations than those on the main LSE listing. For example, there are no requirements around the amount of cash a company must hold or the number of shares they must issue. 

These factors make the AIM an attractive option for smaller companies to float their shares. The AIM has also attracted a number of foreign companies seeking to list their shares in the UK but without having to comply with the more restrictive regulations of the main LSE market. 

Whilst there are benefits to companies in facing less regulation on the AIM, overall it’s seen as a riskier stock market to invest in. It’s been referred to by some as the ‘wild west’ of the London Stock Exchange.

But, there are lots of success stories – Asos plc being one well-known company which graduated from the AIM to a main LSE listing.

Check out our guide for more on AIM investing.

AIM Shares and Inheritance Tax

Another potential benefit of owning AIM shares is that they are potentially given 100% relief from inheritance tax.

HMRC designates the AIM as a ‘not listed’ stock market, meaning its shares are ‘unquoted’. That’s a key definition because unquoted shares are eligible for 100% business property relief for inheritance tax – provided certain criteria are met.

Read our full guide to the AIM shares inheritance tax rules for all the info.

You may also be interested in AIM IHT portfolios. These are investment portfolios created with the aim of complying with business property relief rules and therefore attracting 100% relief from inheritance tax.

Is there an AIM index?

There are several AIM indices, including three organised by the FTSE, which is perhaps best known for its FTSE100 index of the leading UK companies.

The FTSE Russell Group is owned by the London Stock Exchange and produces stock market indices around the world.

FTSE AIM UK 50 Index

The FTSE AIM UK 50 Index covers the 50 largest AIM-listed UK based companies by market capitalisation. 

To be included, companies must be domiciled in the UK and have their primary listing on the Alternative Investment Market. It’s updated quarterly with the latest market movements.

FTSE AIM 100 Index

The FTSE AIM 100 Index covers the largest 100 companies who have their primary listing on the AIM. 

Unlike the FTSE AIM UK 50 Index, constituents of the FTSE AIM 100 Index do not need to be UK domiciled. So, overseas companies with a primary listing on the AIM are included in this index.

FTSE AIM All-Share Index

The FTSE AIM All-Share Index is a stock market index consisting of all of the listed companies on the AIM. 

This is a broad measure of the entire Alternative Investment Market. It should be noted that the AIM includes many overseas companies, so you shouldn’t expect it to be a benchmark for small businesses in the UK.

In addition, some AIM-listed stocks are excluded if they don’t meet liquidity and free-float requirements. For example, if their shares have a very low trading volume.

None of the above FTSE AIM indices are available as AIM tracker funds. However, there are mutual funds and investment trusts which benchmark themselves against other indices that track AIM listed shares.

Numis AIM Indices

The Numis Small Companies Index and Numis Alternative Markets Index are two of the leading indices which track performance among AIM-listed companies.

Both the Schroder investment trust and the abdrn mutual fund we outlined above use the Numis Small Companies Index. They specifically use a version of it that excludes investment trusts, as there are investment trusts listed on the AIM.

What is an ETF?

An Exchange Traded Fund (ETF) is a type of collective investment fund. 

A collective investment fund is where money from different investors is pooled together into a single investment vehicle. This investment vehicle, or fund, then invests money as a single entity on behalf of all the individual investors.

Generally, a fund can invest in all sorts of assets – shares, bonds, property, commodities and even other funds. 

There are a number of benefits to investing via a fund rather than as an individual investor. One of the primary benefits is in cost. Funds are able to get exposure to a wide range of assets much cheaper than an individual investor can.

Think of an ETF that tracks the FTSE100 index of leading UK companies. If you wanted exposure to the entire index you could buy shares in each constituent company individually. But, this would cost a huge amount in dealing fees.

Instead, you can invest in an ETF that’s designed to track the FTSE100 index. An ETF that does this will invest in the FTSE100 companies in proportion to their weighting within the index – all done for you. You simply buy units in the ETF.

Note that an ETF that tracks an index by buying every investment in it in proportion to their size within that index is called a Fully Replicated ETF

As we noted above, though, there isn’t a fully replicating AIM ETF. Similarly, there are no AIM tracker funds.

So, ETFs are a type of fund that’s traded on stock exchanges like individual shares. But, instead of buying ‘shares’ in an ETF you buy units in it. Each unit has a market price that can fluctuate during market hours.

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Because they’re traded on stock exchanges, ETFs have a market price. Every day, ETFs publish their Net Asset Value (NAV) which is intended to be an accurate and reasonable valuation of a share based on the value of the investments in the fund.

However, as ETFs are traded on stock exchanges, market factors can mean that the ETFs market price is not the same as its NAV. You should always check the ETFs market price compared to its NAV before investing.

If an ETF’s market price is lower than its NAV, it’s said to be trading at a discount. If its market price is above its NAV, it’s trading at a premium. This applies to investment trusts, too.

Our recommendation for the best ETF platform is eToro for a general investment account and InvestEngine for a Stocks and Shares ISA.

In fact, investing in ETFs with InvestEngine is totally free from platform charges and dealing fees. Plus, you can get a welcome bonus of up to £50 when you open an account using our unique link, and an ISA bonus of up to £2,500 if you open or transfer an ISA to InvestEngine.

Up to £50 welcome bonus & up to £2,500 ISA bonus

Over 610 ETFs to invest in. Commission-free.

Use our exclusive link to get a free welcome bonus of up to £50 AND an additional bonus of up to £2,500 when you invest or transfer an ISA at InvestEngine.

Ts&Cs apply. Capital at risk if you invest.

Up To £50 Welcome Bonus & £2,500 ISA Bonus

OFFER: Use our exclusive link to get a free welcome bonus of up to £50 AND an additional bonus of up to £2,500 when you invest or transfer an ISA at InvestEngine.

Ts&Cs apply. Capital at risk if you invest.

For more on investing in an ISA, read our guides to the cheapest Stocks and Shares ISA the best Stocks and shares ISA for beginners.

All of the investment platforms in this guide are regulated by the FCA and have FSCS protection.

Best Investment Apps in the UK

In our guide to the best investment apps in the UK, we cover the best platforms to use for a range of different investments.

For investing in mutual funds and investment trusts, we recommend Interactive Investor.

AIM ETF Tracker Funds – Summary

To recap, there are currently no AIM ETF tracker funds. That means you can’t invest in an ETF which tracks the performance of the Alternative Investment Market.

You can invest in ETFs that track the peformance of smaller listed UK companies, though. These tend to be companies with a main LSE listing, however, so they won’t include AIM stocks.

For investing in ETFs we recommend InvestEngine. Don’t forget, you can get an ISA bonus of up to £2,500 using our link. T&Cs apply.

But, there are mutual funds and investment trusts which benchmark their performance against indices that track AIM listed companies. These funds invest in AIM companies with the aim of outperforming their respective benchmark indices.

To invest in these funds and get exposure to the AIM without buying AIM shares directly, you need to use a broker. We recommend Interactive Investor.

Interactive Investor

Interactive Investor has more than 40,000 shares, bonds and funds to invest in. There’s also a range of investment ideas and funds lists to help you decide what to invest in.

Plus, dealing fees are lower than the other major ISA providers and regular monthly investing is free. It also has great customer feedback.

Interactive Investor is regulated by the FCA and has FSCS protection.

FAQs

Is there an AIM ETF?

There are no AIM ETFs that seek to replicate the performance of an AIM index. Instead, you can consider mutual funds and investment trusts which specifically invest in AIM stocks.

Is there an AIM tracker fund?

There are no AIM trackers funds that seek to passively replicate the performance of an AIM index. Instead, you can consider mutual funds and investment trusts which specifically invest in AIM stocks to get exposure to the Alternative Investment Market.

Get up to £2,500 ISA bonus

Use our link to open or transfer an ISA with InvestEngine to get a bonus of up to £2,500, plus up to £50 additional welcome bonus. Ts&Cs apply.
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