The mean loss in the market correction of 22 May to 25 June was just 3.88 per cent as the FTSE All Share fell 10.19 per cent.
Performance of sector and index in 2013 correction
Source: FE Analytics
This is in contrast to the general expectation for smaller companies to fall further in down markets and rise further in rallies, and is probably down to the domestic focus of the sector’s companies.
Last year’s market was led down by the emerging markets-focused sectors which dominate the upper end of the UK market.
However, our data shows that the average smaller companies fund actually performed in line with the index in the 2011 sell-off, one that didn’t have the same genesis in the Federal Reserve's decision to taper quantitative easing, which hit emerging markets.
The sector lost 18.27 per cent between 7 July 2011 and 4 October 2011, marginally ahead of the FTSE All Share which lost 18.17 per cent.
The FTSE 100 lost 17.58 per cent, meaning that the average smaller companies fund lost less than a percentage point more than the largest companies on the index.
Performance of sector and index in 2011 correction
Source: FE Analytics
Our data shows that the average IMA UK Smaller Companies fund has been less volatile than the FTSE 100 over the past three years, a period that includes both the most recent corrections.
The volatility of the sector over that time is 11.33 per cent compared with 15.08 per cent for the FTSE 100.
Unicorn Smaller Companies was the best-performing fund in last year's correction, making 0.44 per cent during the period.
Its stablemate Unicorn UK Income was the top-performing UK Equity Income fund during the same period, too.
The £59.1m small cap fund is headed up by FE Alpha Manager John McClure and Simon Moon, who also run the income fund.
It benchmarks itself against the Numis Smaller Companies index and has outperformed over the past three years, making 73.32 per cent to the benchmark’s 61.64 per cent.
The average fund has made just 52.24 per cent in this time.
Performance of fund vs sector and index over 3yrs
Source: FE Analytics
The other two funds that avoided losing money during this period were Liontrust UK Smaller Companies and Octopus UK Micro Cap Growth.
The £21m Octopus Micro Cap Growth fund, run by Richard Power, invests heavily in AIM as well as in the smaller end of the main market.
The fund has been one of the top-performers in the sector over the past six months, with the AIM market surging after the Government allowed investors to put its stocks in their ISAs.
Source: FE Analytics
The Liontrust and Octopus funds were the top two performers during the 2011 correction, according to FE data, losing 9.67 per cent and 12.1 per cent respectively.
The Unicorn fund was also a top-quartile performer over that time.
Liontrust UK Smaller Companies is run by the same FE Alpha Manager duo – Anthony Cross and Julian Fosh – that run the £1.14bn Liontrust Special Situations fund.
It is top quartile over the past three years thanks to its downside protection, although over one- and five-year periods it is only a second-quartile performer.
The fund has 65 per cent in the AIM market.
Source: FE Analytics
At the other end of the tables, SF Webb Smaller Companies Growth struggled on both occasions, recording fourth-quartile numbers.
Old Mutual UK Smaller Companies was also bottom-quartile in both periods, although the fund is the top-performer over 10 years in the sector.
The Lazard and Dimensional funds also suffered the same fate.
