The European Smaller Companies sector also fared well, with an increase of 32 per cent. Discounts in these sectors currently stand at an average of -12.6 per cent and -13.7 per cent respectively, slightly wider than the investment company average of 8.3 per cent. This may reflect the slightly riskier nature of investing in smaller companies.
Strategic Equity Capital, a trust managed by SVG investment managers, was the top performer in the UK Smaller Companies sector over one year, with an initial investment of £100 growing to £170.
Performance over the longer-term is more mixed. Keeping pace with this one-year performance is Standard Life UK Smaller Companies, which has also grown initial investments by 70 per cent and comfortably exceeded sector averages over three and five years. This may explain why the company is trading at close to par.
Another top-performing sector over the year was Private Equity, with average share price returns of 32 per cent. This marks another good turnaround by the sector from the setbacks it suffered in 2008/2009.
Performance of sectors over 1-yr
Source: Financial Express Analytics
With discounts having already narrowed considerably to their current average of 24 per cent, it will be interesting to see whether this level of performance can be sustained.
Northern Investors, managed by NVM, posted the best one-year results of any AIC member in the sector, turning a £100 investment into £154. The company trades at a discount of -19.9 per cent, one of the narrowest in the sector.
Tim Levett, executive chairman of NVM, said at a recent AIC roundtable that his views on potential investments had been sharpened following the financial crisis: "We are much less inclined to take onboard significant bank debt in our investments."
"Whilst banks are continuing to lend, the level of funding available for smaller companies has reduced over the past three or so years. This has created a gap that is being filled by private equity funds."
Strong performance from many investment companies that are investing in small or unlisted companies is a testament to the many strong businesses that are able to flourish even in difficult economic climates. It is encouraging that managers are finding no shortage of opportunities to invest both in the UK and further afield.
More information on all of the sectors mentioned above, including daily discount and NAV valuations, can be found on the AIC’s website.
*All performance data is to 31 May 2011. All discount data is to 09 June 2011, with the exception of the industry average, which is to 30 April 2011.
Annabel Brodie-Smith is communications director for the Association of Investment Companies. The views expressed here are her own.