Revealed: the funds that have fared best since the Brexit vote
Funds that invest in Britain’s smaller companies have outperformed their large and mid-cap counterparts in the two years since the UK voted to leave the European Union.
The domestically-focused FTSE Small Cap index has returned 38.28% compared with the FTSE 100 index’s return of 31.41% since the Brexit vote, the second anniversary of which falls this weekend.
The average actively managed small-cap fund has returned 48.62% in two years, according to data from FE Analytics.
The top performer has been TM Cavendish AIM, which has produced returns of 91.42% over the timeframe. Jupiter UK Smaller Companies follows closely behind, returning 89.34%.
Mid-caps have endured the toughest ride over the past two years, with the FTSE 250 index underperforming the FTSE 100 and small cap index by 2.27 and 9.14 percentage points respectively.
European small-cap funds have just managed to beat their UK small-cap counterparts with an average return of 48.79%.
Darius McDermott, managing director of fund supermarket Chelsea Financial Services, said: “Some investors may be surprised that UK small-caps have done so well, given they’re generally more domestic-facing than their large-cap and mid-cap peers.
“Small-caps were in fact beaten up in the run-up to the referendum and, at one point, were sitting at a hefty 20% discount relative to the FTSE 100. But when investors realised that the UK economy may not be doomed after all, this discount shrunk (it is around 10% today) as they snapped up the stocks which had unfairly been tossed in the bargain bin. The weaker currency also increased M&A activity, as overseas buyers sought attractively-priced UK smaller companies.”
He added: “With both British and European officials now suggesting we may not get any Brexit agreement until November or even December this year – just three months before we are due to leave the EU – I think it is fair to say nobody knows what will happen over the next few years.
“For now, and for at least over the medium term, the key will be to keep calm and carry on, making sure your portfolio is well-diversified. There is bound to be more stock market volatility, but that will allow brave investors to perhaps pick up some home-grown bargains along the way.”
*Source: FE Analytics, total returns in sterling, 23 June 2016 to 13 June 2018