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; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    SThree: Trainee Recruitment Consultant

    £20000 - £25000 per annum + OTE £45K: SThree: SThree were established in 1986....

    Recruitment Genius: Compliance Manager

    £40000 - £60000 per annum: Recruitment Genius: A Compliance Manager is require...

    SThree: Talent Acquisition Consultant

    £22500 - £27000 per annum + OTE £45K: SThree: Since our inception in 1986, STh...

    Recruitment Genius: Experienced Financial Advisers and Paraplanners

    Negotiable: Recruitment Genius: This extremely successful and well-established...

    Day In a Page

    Seifeddine Rezgui: What motivated a shy student to kill 38 holidaymakers in Tunisia?

    Making of a killer

    What motivated a shy student to kill 38 holidaymakers in Tunisia?
    UK Heatwave: Temperatures on the tube are going to exceed the legal limit for transporting cattle

    Just when you thought your commute couldn't get any worse...

    Heatwave will see temperatures on the Tube exceed legal limit for transporting cattle
    Exclusive - The Real Stories of Migrant Britain: Swapping Bucharest for London

    The Real Stories of Migrant Britain

    Meet the man who swapped Romania for the UK in a bid to provide for his family, only to discover that the home he left behind wasn't quite what it seemed
    Cheaper energy on the way, but it's not all sunshine and rainbows

    Cheaper energy on the way, but it's not all sunshine and rainbows

    Solar power will help bring down electricity prices over the next five years, according to a new report. But it’s cheap imports of ‘dirty power’ that will lower them the most
    Katy Perry prevented from buying California convent for $14.5m after nuns sell to local businesswoman instead

    No grace of God for Katy Perry as sisters act to stop her buying convent

    Archdiocese sues nuns who turned down star’s $14.5m because they don’t approve of her
    Ajmer: The ancient Indian metropolis chosen to be a 'smart city' where residents would just be happy to have power and running water

    Residents just want water and power in a city chosen to be a ‘smart’ metropolis

    The Indian Government has launched an ambitious plan to transform 100 of its crumbling cities
    Michael Fassbender in 'Macbeth': The Scottish play on film, from Welles to Cheggers

    Something wicked?

    Films of Macbeth don’t always end well - just ask Orson Welles... and Keith Chegwin
    10 best sun creams for body

    10 best sun creams for body

    Make sure you’re protected from head to toe in the heatwave
    Wimbledon 2015: Nick Bollettieri - Milos Raonic has ability to get to the top but he must learn to handle pressure in big games

    Nick Bollettieri's Wimbledon files

    Milos Raonic has ability to get to the top but he must learn to handle pressure in big games
    Women's World Cup 2015: How England's semi-final success could do wonders for both sexes

    There is more than a shiny trophy to be won by England’s World Cup women

    The success of the decidedly non-famous females wearing the Three Lions could do wonders for a ‘man’s game’ riddled with cynicism and greed
    How to stop an asteroid hitting Earth: Would people co-operate to face down a global peril?

    How to stop an asteroid hitting Earth

    Would people cooperate to face a global peril?
    Just one day to find €1.6bn: Greece edges nearer euro exit

    One day to find €1.6bn

    Greece is edging inexorably towards an exit from the euro
    New 'Iron Man' augmented reality technology could help surgeons and firefighters, say scientists

    'Iron Man' augmented reality technology could become reality

    Holographic projections would provide extra information on objects in a person's visual field in real time
    Sugary drinks 'are killing 184,000 adults around the world every year'

    Sugary drinks are killing 184,000 adults around the world every year

    The drinks that should be eliminated from people's diets
    Pride of Place: Historians map out untold LGBT histories of locations throughout UK

    Historians map out untold LGBT histories

    Public are being asked to help improve the map