Talking Point  

Advisers are turning to small caps amid market uncertainty

Advisers are turning to small caps amid market  uncertainty

Advisers intend to increase their client’s exposure to small cap equity funds in the year ahead, according to the latest FTAdviser poll.

The poll data shows 45.7 per cent of advisers intend to buy more small cap, 25 per cent intend to hold at the current levels, and 28 per cent intend to reduce their allocation to small caps.  

Smaller company shares sold off sharply in the market crash of March 2020, but have rebounded since.

Data from FE Analytics shows funds in the IA UK Smaller Companies sector have gained 4 per cent since March, although they remain 11 per cent lower this year to date. 

Dividend cuts have also been a feature of the small cap universe in much the ame way they have of large cap land, with 57 per cent of small and mid cap stocks reducing dividends, compared to 50 per cent of companies in the FTSE 100

Tom Sparke, investment manager at GDIM, a discretionary fund management firm in Cambridge said: "We have almost always had some UK small cap funds in portfolios, until recently.

"At one stage our UK weighting was so low that we had no small caps in there. Our weighting is still very low but we do have one small companies fund now which is Chelverton, as the fund has a lot of quality companies in it."

Minesh Patel, an adviser at EA Financial Solutions said: "This would seem to be a good time to buy smaller companies funds, as they are priced quite cheaply."