Why Smaller Companies Funds Have Outperformed

The average UK smaller companies fund has comfortably outperformed the FTSE Small Cap and Numis Smaller Companies indices in 2017 so far

Samuel Meakin 18 October, 2017 | 12:34PM

The average UK smaller companies fund has comfortably outperformed the FTSE Small Cap and Numis Smaller Companies indices in 2017 so far, with the average fund returning 20.6% versus 12.6% for the FTSE and 14.9% for the Numis. Why is this?

There has certainly been a stylistic tailwind benefitting active funds in the period. The category average demonstrates a clear growth bias relative to the FTSE Small Cap index, and small-cap growth stocks as defined by Morningstar have outperformed small-cap value stocks in 2017 to the end of September. Nonetheless, the average fund has also been able to demonstrate strong stock selection on top of that to help drive home the gains over the index over this period.

When compared to the Numis index rather than the FTSE, the category average’s growth bias still remains, but it is less pronounced. The stylistic tailwind versus this index has thus been smaller, but attribution analysis again shows that strong stock selection has helped the average fund to outperform.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Clinigen Group PLC874.50 GBX-0.63
Countrywide PLC62.73 GBX4.19
Dechra Pharmaceuticals PLC2,782.00 GBX-0.64
FDM Group (Holdings) PLC900.00 GBX1.58
Fevertree Drinks PLC2,054.00 GBX-1.20
Foxtons Group PLC45.10 GBX-0.44
Renishaw PLC3,850.00 GBX-2.78

About Author

Samuel Meakin  is a fund analyst for Morningstar

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