Fund buyers hang tight on UK small caps despite strong run

Wealth managers continue to hold UK small-cap funds instead of taking profits and rotating into the larger end of the market, predicting a rise in M&A activity will boost the sector.

Small caps have performed well over the last few quarters, returning on average 32.5% over the year to 18 October. However, rather than take profits, wealth managers are continuing to hold smaller companies funds because of the potential for more consolidation in the sector, the low correlation between stocks, and the benefits of a pickup in UK growth. Fund buyers’ favourite small-cap portfolios include Cazenove UK Smaller Companies, Aberforth Smaller Companies, Old Mutual Smaller Companies, Miton UK Smaller Companies and Chelverton UK Equity Income. Rob Burdett, multi-manager at F...