Basic Trading Guide to the FTSE AIM All-Share Index
The FTSE AIM All-Share Index is known as the broadest index that tracks the LSE’s (London Stock Exchange) Alternative Investment Market (or AIM). The AIM All-Share index includes 1029 companies which are on the LSE’s AIM segment – a sector of the exchange which is a growth market dedicated to medium sized and small companies. The companies that are listed on this index are representative of £69 billion of total market capitalisation and comprise a broad spectrum of businesses, including venture-capital backed and early stage companies as well as companies that are more established and are looking for access to growth capital. There are several other indices which are included in the FTSE AIM Index Series as well as the FTSE AIM All-Share index. These include:
- The FTSE AIM UK 50 – this represents the 50 largest eligible companies in the UK
- The FTSE AIM 100 – this represents the 100 largest eligible companies
- The FTSE AIM All-Share Supersector – these indices represent the performance of the sectors that are comprised within the AIM Index.
The biggest market capitalisation of any company that is found on the AIM index is £1.8 billion, with the average market capitalisation being around £50 million. There is an average annual dividend yield of 1.52% for AIM index shares.
A History of the FTSE AIM All-Shares Index
All of the FTSE indices can trace their origin back to 1962 when the FT Actuaries Index was launched. This was designed to track the broad UK Stock Market’s performance. The Financial Times Stock Exchange Group (better known as FTSE) is a joint venture that was established in 1995 between the Financial Times and the London Stock Exchange. All of the FTSE’s indices are managed by FTSE Russell, a body that is entirely owned by the London Stock Exchange Group. There is a complete series of FTSE indices which have been created with the purpose of tracking the performance of standard and large-scale listing shares on the London Stock Exchange. After the creation of these indices, the Alternative Investment Market series indices were introduced, with the purpose of tracking how well the growth segment of medium and smaller companies performs. 1995 saw the commencement of operations of the AIM segment. Originally, it only included 10 companies, which represented a market capitalisation of £82 million. However, over the years since it was launched, this segment now has over 3,500 companies listed, which raise over £90 billion of capital for its participants. Currently, the AIM index includes companies that have their headquarters in 24 different countries and which operate across over 100 countries. The companies that are listed on the AIM indices may grow and eventually move on to hold a listing on the LSE’s more rigorous primary market. This has already happened to over 100 companies that were originally listed on the AIM market since its inception.
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What is the Composition of the FTSE AIM All-Share Index?
The FTSE AIM All-Share Index is a listing of all of the AIM quoted companies that can meet the eligibility criteria that has been set by the FTSE. In terms of market capitalisation, the top ten listings found on the FTSE AIM All-Share Index include:
- New Europe Property Investments Plc
- Hutchison China Meditech
- James Halstead
- Dart Group plc
- Breedon Aggregates Ltd
- Newriver Retail Ltd
- Clinigen Group Plc
- Origin Enterprises Plc
Companies that are listed on the AIM indices include those from all nineteen supersectors of the ICB (Industry Classification Benchmark). These include sectors such as real estate, healthcare, basic resources, oil and gas, retail, industrial services and goods, technology and financial services. These supersectors give investors a clear way to pinpoint macroeconomic investment and trading opportunities, and at the same time, provide a stable basis for trading products. According to market capitalisation, the top sectors found on the AIM indices include:
- Industrial services and goods
- Financial services
- Gas and oil
What are the Rules for Companies Listing on the AIM All-Shares Index
Unlike those companies that list on the LSE’s main market indices, the companies that list on the AIM indices do not have to meet the same requirements with regard to market capitalisation and size, the amount of shares that must be in free float, the minimum employee figures, the amount of profitability or turnover, or length of trading record time. There are, however, some guidelines that must be adhered to. These include:
- Company shares must be free from any restriction on transferability
- Settlement arrangements for trading company shares must be in place
- Trading in any AIM security must be possible via electronic settlement
- All companies listed on AIM indices must have an appointed broker and a nominated advisor
- All companies must have paid a London Stock Exchange joining fee
- Any company regarded as an “investing company” must raise at least £6 million in cash through equity fundraising when they are admitted to AIM
How are the Companies on the FTSE AIM All-Shares Index Reviewed?
The companies that are on the FTSE AIM All-Shares Index are subject to review on a regular basis and companies may either be added or removed depending on circumstances. Meetings are held quarterly to determine which companies should be on the index, with these meetings taking place every February, May, August and November. The make up of the companies on the AIM All-Shares Index may change depending on relevant current market capitalisation data. For example, if a company has grown beyond the category of a small to medium sized operation, it may qualify to move up to the primary LSE market rather than remaining on the AIM indices. However, it is important to note that a company cannot be automatically promoted from the AIM indices to the Main Market, but instead must apply formally to move up. There are numerous AIM companies that are very successful but which choose to remain on the junior market as the regulation is much less stringent, and this explains why some of the companies that appear on the AIM All-Shares Index are quite large.
Other educational materials
- FTSE 100 Index
- FTSE All-Share Index
- Japanese Exchange Group (JPX)
- LSE – London Stock Exchange
Recommended further readings
- Does one size fit all? The consequences of switching markets with different regulatory standards. European Financial Management Jenkinson, T., & Ramadorai, T. (2013)., 19(5), 852-886.
- “Wavelet exploratory analysis of the FTSE ALL SHARE index.” Vorlowa, Antonios Antonioua Constantinos E. (2003).