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

Voices
Homeless Veterans charity auction: Cook with Angela Hartnett and Neil Borthwick at Merchants Tavern
charity appeal
Sport
Amir Khan is engaged in a broader battle than attempting to win a fight with Floyd Mayweather
boxing Exclusive: Amir Khan reveals plans to travel to Pakistan
Arts and Entertainment
Strictly finalists Simon Webbe, Caroline Flack, Mark Wright and Frankie Bridge
tvLive: Simon Webbe, Caroline Flack, Mark Wright and Frankie Bridge face-off in the final
Sport
Ched Evans in action for Sheffield United in 2012
footballRonnie Moore says 'he's served his time and the boy wants to play football'
PROMOTED VIDEO
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

    Carlton Senior Appointments: Private Banking Manager - Intl Bank - Los Angeles

    $200 - $350 per annum: Carlton Senior Appointments: Managing Producer – Office...

    Carlton Senior Appointments: San Fran - Investment Advisor – Ind Advisory Firm

    $125 - $225 per annum: Carlton Senior Appointments: San Fran - Investment Advi...

    Sheridan Maine: Commercial Finance Manager

    Up to £70,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...

    Sheridan Maine: Regulatory Reporting Accountant

    Up to £65,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...

    Day In a Page

    Amir Khan: 'The Taliban can threaten me but I must speak out... innocent kids, killed over nothing. It’s sick in the mind'

    Amir Khan attacks the Taliban

    'They can threaten me but I must speak out... innocent kids, killed over nothing. It’s sick in the mind'
    Homeless Veterans appeal: 'You look for someone who's an inspiration and try to be like them'

    Homeless Veterans appeal

    In 2010, Sgt Gary Jamieson stepped on an IED in Afghanistan and lost his legs and an arm. He reveals what, and who, helped him to make a remarkable recovery
    Could cannabis oil reverse the effects of cancer?

    Could cannabis oil reverse effects of cancer?

    As a film following six patients receiving the controversial treatment is released, Kate Hilpern uncovers a very slippery issue
    The Interview movie review: You can't see Seth Rogen and James Franco's Kim Jong Un assassination film, but you can read about it here

    The Interview movie review

    You can't see Seth Rogen and James Franco's Kim Jong Un assassination film, but you can read about it here
    Serial mania has propelled podcasts into the cultural mainstream

    How podcasts became mainstream

    People have consumed gripping armchair investigation Serial with a relish typically reserved for box-set binges
    Jesus Christ has become an unlikely pin-up for hipster marketing companies

    Jesus Christ has become an unlikely pin-up

    Kevin Lee Light, aka "Jesus", is the newest client of creative agency Mother while rival agency Anomaly has launched Sexy Jesus, depicting the Messiah in a series of Athena-style poses
    Rosetta space mission voted most important scientific breakthrough of 2014

    A memorable year for science – if not for mice

    The most important scientific breakthroughs of 2014
    Christmas cocktails to make you merry: From eggnog to Brown Betty and Rum Bumpo

    Christmas cocktails to make you merry

    Mulled wine is an essential seasonal treat. But now drinkers are rediscovering other traditional festive tipples. Angela Clutton raises a glass to Christmas cocktails
    5 best activity trackers

    Fitness technology: 5 best activity trackers

    Up the ante in your regimen and change the habits of a lifetime with this wearable tech
    Paul Scholes column: It's a little-known fact, but I have played one of the seven dwarves

    Paul Scholes column

    It's a little-known fact, but I have played one of the seven dwarves
    Fifa's travelling circus once again steals limelight from real stars

    Fifa's travelling circus once again steals limelight from real stars

    Club World Cup kicked into the long grass by the continued farce surrounding Blatter, Garcia, Russia and Qatar
    Frank Warren column: 2014 – boxing is back and winning new fans

    Frank Warren: Boxing is back and winning new fans

    2014 proves it's now one of sport's biggest hitters again
    Jeb Bush vs Hillary Clinton: The power dynamics of the two first families

    Jeb Bush vs Hillary Clinton

    Karen Tumulty explores the power dynamics of the two first families
    Stockholm is rivalling Silicon Valley with a hotbed of technology start-ups

    Stockholm is rivalling Silicon Valley

    The Swedish capital is home to two of the most popular video games in the world, as well as thousands of technology start-ups worth hundreds of millions of pounds – and it's all happened since 2009
    Did Japanese workers really get their symbols mixed up and display Santa on a crucifix?

    Crucified Santa: Urban myth refuses to die

    The story goes that Japanese store workers created a life-size effigy of a smiling "Father Kurisumasu" attached to a facsimile of Our Lord's final instrument of torture