While UK smaller companies investment trusts have had a rough time over the past year, fund managers...
While UK smaller companies investment trusts have had a rough time over the past year, fund managers investing in the sector remain positive on the outlook going forward.
Over one year to 31 June 2002, £1,000 invested in the average smaller companies trust would have fallen to £727, while over five years it would have returned £1,089.
However, Mark Davids, manager of Fleming Smaller Companies, believes the outlook for the sector is positive relative to large caps.
He said: 'The value in the sector, combined with the high weighting in old economy stocks, leaves us confident as to the relative attractiveness of small caps as an asset class in the current market environment.'
Davids added that, at first glance, the FTSE Small Cap Index is trading at a premium to the FTSE 100 in terms of its prospective P/E of around seven, which looks like an anomalous reversal of the traditional small-cap discount. But, he noted: 'Stripping out loss-making technology and telecoms companies, many of which have come down into small-cap from mid and large-cap indices, the FTSE Small Cap Index trades at an underlying discount of some 18% to the FTSE 100.'
Gervais Williams, manager of the Gartmore Fledgling Trust, said: 'We believe strongly that UK smaller companies are attractively valued both on an absolute basis and relative to the wider market.
'We have a particularly high level of conviction in the best run companies, which are benefiting from rising public spending, not least those in the healthcare sector.
'Elsewhere, we believe there is still more to come from the consolidating housebuilder sector.'
Over five years to 31 May 2002, the Gartmore Fledgling Trust has returned £1,951 on £1,000 invested. Over 10 years, the Fleming Smaller Companies Trust has returned £2,434.