Roland Arnold, who runs over £1bn of client cash across a number of UK equity funds at BlackRock, believes small caps can be the main beneficiaries of the changes in the global economy resulting from the pandemic.
Mr Arnold runs the £560m UK Special Situations fund, which invests in small, mid and large cap companies, as well as a smaller companies fund and a smaller companies investment trust.
He said: “We have said many times in recent months, that we can’t pretend to have the answers to many of the questions that have arisen as a result of the COVID-19 pandemic.
"One thing that we are sure of is that things will get better, and eventually return to normal, or at least settle at the “new normal”. From what we are seeing in company trading updates, and hearing from the management teams that we are speaking to, the direction of travel remains the same.
"In our mind the result of COVID-19 is simply bringing on an acceleration in many of the structural trends that have been happening in various industries over a number of years.
"Whether it’s the shift to more agile/remote ways of working or falling footfall for bricks and mortar retailing as more people shop online. These changes were happening already, it’s just that now they are happening a lot faster.”
Mr Arnold added: “One of the key attractions of our asset class is the ability of well managed smaller companies with more agile structures to adapt to changing market dynamics.
"Many larger companies simply lack the flexibility, given their large complex structures, to respond to ongoing changes in the markets in which they operate.
In an environment such as that presented by COVID-19, it will be those businesses that can adapt quickly that will not only survive, but also thrive.
"There are many businesses that can use change to their advantage, and we look to the future with optimism.
"It is simply the pace of change that has accelerated. Dynamic, nimble smaller companies will be best placed to adapt to the new normal, see their competitive positions enhanced, and thrive as they emerge from this pandemic in a stronger positions than before. “
david.thorpe@ft.com
