Analysis from Deloitte, the business advisory firm, has found that in the last 12 months more than £1.5 billion has been invested in asset-backed AIM companies.  The analysis also shows that the model that has been developed to invest in asset-backed businesses is also fast becoming the investment model of choice on AIM.

Kerr Mitchell, lead partner for the AIM team at Deloitte, comments:
“We have seen record levels of fundraising as investors look to access the growth potential of asset-backed companies.  While investors were initially attracted to traditional real estate, they are now looking at energy, shipping and other asset categories.”

“The model is based on the proposition for an off the shelf company to be floated with no existing assets and no existing contractual commitments for asset purchases, but a plan to invest the money in a particular, hopefully fast appreciating, asset class.  In total more than £1.5 billion has been raised on AIM in this way over the last year, suggesting that investors with spare cash are happy to use this model as a way to chase above average returns in certain sectors without the potential pitfalls of entering them directly through making investments of their own.”

Examples of the new asset-backed model as a route to market inlcude:

• Dawnay Day Treveria - German real estate, raise of €375 million in December 2005
•  Trinity Capital - Indian real estate, £250 million, April 2006
• The Ottoman Fund - Turkey real estate £170 million, March 2006
• Energy XXI Acquisition Corporation - oil and gas reserves, $300 million, October 2005
• Raven Russia - Russian real estate, £153 million, July 2005

Mitchell continues: “Typically the listed entry has no employees except for a number of non-executives to ensure that the company invests along the strategy set out in its AIM admission document. A management company is then set up to identify market opportunities, and make recommendations to the non-execs as to where the money raised should be spent.  Significantly increasing the effectiveness of these vehicles is the ability to leverage the investments made to create owned portfolios several times the value of the original equity funds raised. They are also structured to minimise the impact of taxation, both in the corporate vehicle and on the investor return.

“As more and more of these types of investment companies enter a particular market the potential for capital growth reduce as the laws of supply and demand become skewed against the fund managers chasing the same opportunities.  The market continues to look for the next asset class to outperform, however, and wherever a management team can demonstrate a credible track record in investing in a particular asset class, be it property, oil & gas, or any other potential growth area such as shipping for example, this method of investing appears to continue to be the model of choice.”

Ends

About Deloitte
In this press release references to Deloitte are references to Deloitte & Touche LLP which is among the country’s leading professional services firms, providing audit, tax, consulting and corporate finance services. Known as an employer of choice for innovative human resources programmes, it is dedicated to helping its clients and people excel. Deloitte & Touche LLP is the United Kingdom member firm of Deloitte Touche Tohmatsu (‘DTT’), a Swiss Verein whose member firms are separate and independent legal entities.  Neither DTT nor any of its member firms has any liability for each other’s omissions.  Services are provided by member firms or their subsidiaries and not by DTT. 

Deloitte & Touche LLP is authorised and regulated by the Financial Services Authority. 

The information contained in this press release is correct at the time of going to press.