Derek Pain: 'AIM can be risky, but even blue chips have been known to fail'

His portfolio has suffered a few AIM disasters, but Derek remains a supporter

Not for the first time AIM is under fire. Its hostile army of critics has alighted on the speculation that accompanied suggestions of a spectacular oil discovery in Sussex to attack the junior share market's record as an investment platform.

Although the no pain, no gain portfolio has suffered a few AIM disasters, I remain a firm supporter and have never indulged in the often hysterical occupation of AIM bashing. Indeed, the portfolio has made money investing in AIM. Over the years it has descended on many junior market shares. The current portfolio includes five AIM stocks, and my shopping list of possible additions features a further three incumbents.

True, AIM (its formal title is the Alternative Investment Market) has suffered a multitude of company failures. There has also been a tendency to de-list. But I do not think it deserves to be described as a "casino" and to undergo an almost continuous deluge of angry criticism from some experienced investors and observers.

The whole point of AIM and fringe markets, like ISDX and GXG, is to provide a share listing for businesses that would otherwise be regarded as too young, too small or just unsuitable for a full listing. It allows such companies to raise much needed capital and possibly enjoy the exposure that would otherwise be denied. Perhaps stricter controls would have headed off some of the disasters that occurred. But the market's regulatory "light touch" is intended to attract newcomers. And AIM is considerably cheaper than a full listing, although the cost of membership could be regarded as high and seems to be increasing.

Clearly small investors should exercise extreme caution. There are, I believe, many excellent AIM companies that will continue to prosper and could eventually move to full listings. At the same time there are a host of speculative shares, particularly in the mining and oil segments, as well as outright duds. Some companies seem to exist merely to survive, costing shareholders hard cash.

It is true that AIM as a whole has performed poorly when compared to the blue blood Footsie. I believe this is due largely to the influence of resource stocks and the volatility which small companies invariably suffer. The market was launched in 1995, replacing in part what was then the Stock Exchange's poorly organised matched bargains system. Compared with its predecessor, AIM is a whirlpool of regulation.

Nine of the 10 founders have disappeared, through not always profitable bids. Only Athelney Trust survives. And its shares are handsomely in profit.

Most successful AIM share is ASOS, the online clothing retailer. It has surged from some 5p to, at one time, 7,000p. Best portfolio performer is the Booker cash and carry chain that started life on AIM, although, like so many others, it now enjoys a full listing. The portfolio did not manage to get in at the low point, arriving at 24.5p; the price has been up to 176.5p and is, as I write, around 150p.

Other notable successes include Goals Soccer Centres, and Prezzo. Profile Media is among the failures and SnackTime, a current member, ranks as a near disappeared investment.

By its very nature AIM is a more risky environment and investors should, of course, be exceedingly careful. Some constituents are outright gambles. Still, it should be remembered that fully listed companies, including blue chips, can go bust.

yourmoney@independent.co.uk