Smaller companies have had a tough time of it in 2016 after their reliance on the domestic economy caused investors to shy away from them in the run-up and aftermath of the Brexit referendum.
However, this part of the market has tended to generate strong returns over the long run so we’ve taken a closer look at the IA UK Smaller Companies sector to identify some of the funds that have consistently outperformed their peers over recent years.
Performance of indices over 20yrs
Source: FE Analytics
As with the previous articles, we’ve focused on funds’ decile rankings for cumulative five-year returns up to the end of 2015 as well as the annual returns of 2015, 2014 and 2013, annualised volatility, maximum drawdown, downside capture, alpha generation, Sharpe ratio and upside capture.
We then added up the 10 decile rankings for each fund in the sector to give a simple score, where a 10 shows a fund has been first decile in each metric and a 100 would indicate 10th decile performance in each.
We’ve chosen to use the Numis Smaller Companies excluding Investment Companies index as the benchmark in this study as it is the most common benchmark in the sector. When the research is re-run to use the FTSE Small Cap index, which is also popular, the ranking order of the funds doesn’t change as the scores are pretty much the same.
The following pages reveal the five best performers (although those that concentrate on micro-caps have been excluded) before the 20 top scoring funds of the sector are shown in the final slide.
