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European small cap outperformance ‘to continue for 10 months’

Kit Klarenberg
Written By:
Kit Klarenberg

Small cap companies listed on European stock exchanges have outperformed their larger counterparts by 3.3% year-to-date, according to Euromoney Indices.

The last time European small caps delivered sustainable outperformance compared to their larger counterparts was from December 2012 to March 2014, indicating the trend current trend could continue for another 10 months.

This year, the Euromoney Smaller Companies Index has returned 24% to date, compared to 20% for the Euromoney EMIX Europe Index.

The top performing small caps this year have been Banca Popolare di Milano (+76%), Spanish electricals company Gamesa Corporación Tecnológica (+87%) and Finnish tyre producer Nokian (+56.88%).

“Europe’s small caps are arguably the region’s most entrepreneurial and innovative companies and our research indicates that there are more gains to come in the sector,” said Sui Chung, managing director of Euromoney Indices.

“We are firm believers that in today’s low-growth climate investors need to include smaller companies in their portfolios to access meaningful returns. Many fund managers are heralding 2015 as the year for smaller companies and the valuation premium for European small caps relative to large caps has fallen, presenting an attractive entry point for investors.”

Index comparison during last period of small cap outperformance