Smaller companies outperform large caps

Analysis carried out by the Association of Investment Companies showed that the Standard Life UK Smaller Companies Trust, managed by Harry Nimmo for the past 10 years, is the most consistent performer of the past decade.

The AIC looked at annual returns to compile the top 20 list, but noted that a £100 investment in the trust over 10 years has grown to £645.

The research also found that eight of the top 20 most consistent top performers of the decade are on double-digit discounts, with four of these in the UK smaller companies sector.

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Annabel Brodie-Smith, communications director at the AIC, said: “It’s interesting to see that the UK smaller companies sector has continued to dominate this year, but there’s no telling what the future holds.”

Mr Nimmo, manager of the Standard Life UK Smaller Companies fund, said: “Strong year-to-date performance means a more selective approach is warranted, and we prefer to focus on under-appreciated businesses in control of their own destinies.

“In particular, those demonstrating durable earnings trends and strong cashflow generation, whatever the market environment, should prove more resilient and outperform in the long term.”

The second most consistently performing investment company of the decade is Dunedin Smaller Companies, managed by Ed Beal.


Ben Yearsley, head of investment research at Charles Stanley, said: “Over the long term I would back smaller companies to outperform larger ones – it is far easier doubling the turnover of a £10m business than a £10bn one.

“However over the shorter term, valuation will play a bigger part in relative performance. Currently the mega caps are at a large discount to mid and small cap companies, therefore over the next few years, I can see large and mega caps doing well.”