FTSE Fledgling index

longwalks1

Is the flegdling index a little 'safer' than the AIM? Am looking at a couple of companies and one is listed in the fledgling index. I know AIM can be very volatile, but wondered about the fledgling?
Cheers

Masomnia

More risky. More volatility, less liquidity, less regulation (I'd guess, someone might have to clear that up), smaller companies, so more chance of delisting etc.

Not that it's a bad idea necessarily, but beware the downsides!

Ark_Welder

Masomnia wrote: »

More risky. More volatility, less liquidity, less regulation (I'd guess, someone might have to clear that up), smaller companies, so more chance of delisting etc.

Not that it's a bad idea necessarily, but beware the downsides!

There's actually more regulation for companies in the Fledgling index because they are listed on the main market. Companies listed on AIM have less-demanding reporting requirements.

Whilst AIM does have a couple of companies that would appear in the FTSE100 if they were on the main market, and quite a few that would appear in the FTSE250, the smallest companies are smaller than those in the Fledgling index (according to DigitalLook). The Fledgling index also contains some rather well-known investment trusts (although well-known might be a rather subjective term!)

FTSE Fledgling
FTSE AIM All-Share

sabretoothtigger

The FT250 is the best index. It avoid the largest companies of all and it will sell any company that inflates to that size.

Where as ft100 sells the weakest, it makes more sense to sell high and that strategy seems to reflect in a far sharper graph

One of the largest trusts in the uk ironically does invest in some small companies, I'd also consider his judgement. Invesco perp

Ark_Welder

sabretoothtigger wrote: »

The FT250 is the best index. It avoid the largest companies of all and it will sell any company that inflates to that size.

Therefore, missing out on any growth that occurs once the company is in the lower reaches of the FT100

sabretoothtigger wrote: »

Where as ft100 sells the weakest...

So does the FT250, which also has to sell those companies that fall below the 350th (or thereabouts) position when ranked by the market cap size.


[edit] 'Trackers', doing the selling....!

bowlhead99

Masomnia wrote: »

More risky. More volatility, less liquidity, less regulation (I'd guess, someone might have to clear that up), smaller companies, so more chance of delisting etc.

Not quite. The companies in the fledgling index are the ones on the main market that are too small or too thinly traded to qualify for inclusion in the small-cap index.

You are right they may be volatile with large spreads but they are still main market rather than AIM and so they have to follow the listing rules to maintain their listing- while AIM companies follow the lighter-touch regulation of that market.

Some AIM companies can be worth hundreds of million or even a billion plus and not bother to move to main market, while others do choose to move and go straight to the FTSE 250 when they "graduate". So some are quite a bit bigger than a typical FTSE fledgling co, while others are not. You can't really jump to conclusions without doing your research on the company concerned.

At a bare minimum you could look at historic charts to see historic price movements, spreads, and volumes if you were curious about that, but that in itself wouldn't give you an investment case one way or another. And a chart doesn't tell you if they will delist or double in value next week.

If it's any comfort, not many delist without warning signs and giving notice of their intentions but it does happen, and if course once the writing is on the wall you won't be selling them at the price they were at before it was. The only shares I've been in which went bust or delisted were AIM or Plus but plenty of high profile FTSE companies have gone the same way so you can't afford to generalise. Best thing is just to say don't invest in individual companies if you don't want the risk of investing in individual companies...

IronWolf

There's nothing inherently wrong with the Fledgling or AIM for that matter. Check the daily volume over the last year if you are worried about liquidity, for most investors though its not much of an issue unless you have a very sizable investment pot.

bigadaj

Ark_Welder wrote: »

Therefore, missing out on any growth that occurs once the company is in the lower reaches of the FT100



So does the FT250, which also has to sell those companies that fall below the 350th (or thereabouts) position when ranked by the market cap size.


[edit] 'Trackers', doing the selling....!

Interesting that the 250 has outperformed the 100 over recent times though. My gut feeling would be that the grater international divestiture of the larger index would have been better than a predominant uk bias but that's certainly been wrong over the recent past.

Ark_Welder

bigadaj wrote: »

Interesting that the 250 has outperformed the 100 over recent times though. My gut feeling would be that the grater international divestiture of the larger index would have been better than a predominant uk bias but that's certainly been wrong over the recent past.

Perhaps it's the definition of better that's the issue.

The largest company in the FT250 is 1.3% of that index (3i Group), whereas the largest in the FT100 is either HSBC at 8.23% or Shell just a tad more than than if the capitalisations of the A and B shares are combined. So there is an increased concentration of weighting towards the top of the index. If one of those companies falls then it has more of an effect on the index than if the same happens in the FT250. There are also the sector concentrations in the FT100 towards miners and oil/gas, which have not done so well either. Plus, both RBS and Lloyds are still FT100 members even after their falls.


The following factsheets show some interesting graphs:

http://www.ftse.com/Analytics/FactSheets/Home/FactSheet/ProductRegions/ASX/1/EUR/1?fromftse=true

Over 10 years, the best-performing indices on a total return basis have been the FT250 and the Fledgling. The FT100 and Small Cap are the ones that have lagged behind. So the two indicies in the 'middle' have had opposite performances, so to have the two at each end. I'll leave you to make up your own minds over AIM!

The FT250 and Small Cap are similar in some respects in that both lose 'winners' that are promoted out of the top and gain 'losers' that fall in from above. They also gain and lose in a similar fashion at the bottom. Perhaps there is some logic that explains this somewhere.