Small-cap funds in surprise performance dip

Δημοσιεύθηκε: 1 Μαΐου 2015 - 16:50

More than half of actively-managed UK equity funds underperformed during 2014, new research shows, as investors continue to pour money into index-tracking products.

S&P Dow Jones Indices said in its latest Europe Scorecard that 55 per cent of UK equity funds underperformed the S&P UK Broad Market Index, which includes 453 UK companies, compared to 11 per cent in 2013.

The underperformance was worst among small-cap funds, almost three-quarters of which underperformed. Large- and mid-cap funds did better, with just over two-fifths of them doing worse than the relevant benchmark.

Small-caps generally had a bad year in 2014, but Jason Hollands at Tilney Bestinvest said that asset weighting probably explained the funds' underperformance. Several of the biggest small-cap funds did poorly last year, in particular Standard Life's UK Smaller Companies.

"Our research . . . shows that generally, small-cap managers add the most value in down markets," he said.

Mr Hollands added that recent launches in the small-cap arena suggested managers thought that valuations were now attractive.

The S&P report corrects for "survivorship bias" and includes funds that were present at the start of the year but merged or liquidated by the end of it. This has a significant effect on actively managed US equity funds in particular - over five years, almost 95 per cent of sterling-denominated US funds did worse than S&P's benchmark index, and 35 per cent of them were closed or merged.

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Investors have continued to sell UK equity funds; figures from the Investment Association show that the category suffered its largest ever net monthly outflow, of £963m. Much of this looks to have found its way into European funds, which had inflows of £663m.

And investors are still flocking to passive funds. The same data show that sales of trackers in March were £938m, the highest ever level. Over £100bn is now under management in trackers, accounting for 11.5 per cent of all open-ended funds.

The inflows came despite March being a poor month for fund sales generally; net retail sales were £1.1bn, less than half the level seen in March last year, despite the annual Isa allowance having increased to £15,000 during the course of the year.

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