2013 has been the year of smaller companies
Firms which avoided global woes provided the best returns
Investors who backed smaller firms this year have been proved astute for the second year running. Four of the five strongest investment fund sectors had a small cap focus.
The Japanese Smaller Companies sector was the most profitable, returning 36 per cent over the year. Japan was boosted by Abenomics, the term coined to describe the policies being pushed through by Japan’s Prime Minister Shinzo Abe.
It consists of “three arrows” – named after the Japanese legend that individual arrows can break, but three held together are very strong. The policies he’s backing are bold monetary relaxation, flexible fiscal stimulus, and reviving the private sector.
But there is a wider reason driving smaller company funds to outperform those backing large firms, believes Tom Purdie from FundExpert.co.uk.
“There is a vast selection of stocks for fund managers to choose from,” he said. “This means a large range of possibilities, and significant opportunities to build a highly diversified portfolio. Larger, often global, businesses are perpetually in thrall to the latest central bank action.”
He also pointed out that unlike larger companies, smaller companies are not overwhelmed by broader macro trends. Being in niche markets allows them to maintain good performance regardless of what is happening in the wider economy.
On the other side of the coin, the worst-performing sector of the year was Global Emerging Markets, mainly on the back of taper fears in the US, which came to fruition in the middle of last week.
“The witching hour was 22 May, when Ben Bernanke mooted the gradual withdrawal of money printing,” recalled Mr Purdie. “Before that date the FTSE Emerging index was already falling. But from 22 May the slide accelerated.”
However, he said that there are still opportunities in emerging markets over the long term. “Emerging markets continue to grow 4 per cent faster than developed markets, and many have much more youthful demographics,” he said. That’s crucial as young populations drive growth.
But he warned that investors should expect more turbulence in emerging market equities in 2014 especially as the market focuses on the arrival of US tapering.
“For those wanting to exploit the long-term opportunity of emerging markets, drip-feeding will deal with the problem of market turbulence, allowing you to limit short-term stress while beingpositioned for long-term potential.”
The best-performing individual fund of the year was AXA Framlington Biotech. “It’s interesting to see a tech-focused fund in the top 10 in a year which saw the Twitter IPO and Bitcoin fluctuating valuations hit the headlines,” Mr Purdie said.
Meanwhile, 2013 proved to be another sorry year for gold investors. Gold funds propped up the performance tables, carrying on their poor showing from 2012. However, 2013 was more severe for gold. The worst losses of 2012 were around 30 per cent. In 2013 the worst gold fund slumped more than 60 per cent.
Independent Partners; request a free guide on NISAs from Hargreaves Lansdown
How couples can protect their financial interests when cohabiting
Four million signed up for company pension scheme following government’s auto-enrolment
Money alert: Overdrafts at HSBC and First Direct
Buyers beware of new-build home headaches
Child Maintenance Service to replace Child Support Agency - but is it better?
- 1 Jeremy Clarkson 'sees no problem' with his racist language on Top Gear, says BBC
- 2 Richard Dawkins on babies with Down Syndrome: 'Abort it and try again – it would be immoral to bring it into the world'
- 3 London restaurant 34 creates champagne glass modelled on Kate Moss’ left breast
- 4 ALS ice bucket challenge co-founder Corey Griffin drowns, aged 27
- 5 James Foley beheading: Fox news presenter Megyn Kelly annoyed by Ferguson update during broadcast about murdered journalist
Richard Dawkins on babies with Down Syndrome: 'Abort it and try again – it would be immoral to bring it into the world'
Scottish independence: English people overwhelmingly want Scotland to stay in the UK
Isis threat: Cameron wants an alliance with Iran
Michael Brown shooting: Chaos erupts on the streets of Ferguson after autopsy shows teenager was shot six times – twice in the head
Bin bag full of cats' heads discovered near Manchester's Curry Mile
Disgusting, frustrating, but intriguing: how the country really feels about its politicians
iJobs Money & Business
£20000 - £25000 per annum + OTE £40,000: SThree: Computer Futures has been est...
£25000 - £28000 per annum: Ashdown Group: Generalist HR Administrator - Tunbri...
£45000 - £55000 per annum: Harrington Starr: A well-established financial soft...
Negotiable: Harrington Starr: Service Desk Analyst (Graduate, Helpdesk, Deskto...
Day In a Page
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens
A seven-bedroom Grade II-listed property with a separate self-contained apartment
A five-bedroom Victorian house with three reception rooms and galleried landing, £695,000
A six-bedroom farmhouse with five acres of land in a former cloth-making village
A secluded seven-bedroom detached house with large private garden, £490,000
A three-bedroom cottage overlooking Sarratt village green with open fires and solid oak floors
A three-bedroom maisonette flat in a Grade I-listed, Georgian townhouse in a sought-after location
A one-bedroom apartment located within a private gated development, north of Turnham Green
Look forward to a brighter future at two-bedroom Sunny Cottages, ideal for Londoners looking to downsize
A three-bedroom red-brick cottage with outbuildings and pretty gardens, £200,000
This three-bedroom flat within a former textile factory spans the corner of the fourth floor and has a balcony