But it is not just in the UK that managers are looking to access the smaller-companies universe. Mr Lanning has investments in the Polar Capital Japan fund. “It has a smaller to mid-cap bias and it has done very well – and is up by circa 43 per cent year-to-date.”
Mr Farley has also looked to Japan, and has access to the market via Baillie Gifford Japanese Smaller Companies fund. He says: “It has performed well and we think it has an effective team approach.”
Seven’s Mr Kumar’s view on small caps recently has been that the UK market has had a very good run in the past couple of years and as a result he has moved underweight UK small caps, preferring instead to look for value in the small- and mid-cap section of the European market, where he uses the iShares Euro Stoxx Mid and the iShares Euro Stoxx Small ETFs.
He says: “Although the small-cap sector has similarly outperformed in Europe, there is still the hangover from the eurozone crisis and we see greater opportunity for smaller firms to grow as the eurozone continues to recover.”
However, Scott Spencer, senior investment manager at Aberdeen Solutions has no pure small-cap exposure, but has a bias to active managers, who tend to find better opportunities down the cap spectrum. He says: “This is especially true in areas like Japan and Asia, given that analyst coverage focuses on the bigger firms.”
Philip Scott is a freelance journalist
SMALL-CAP FUNDS
WHO THE MANAGERS ARE BACKING
James de Bunsen, manager, Henderson Multi Manager Income & Growth fund:
Mr de Bunsen is backing the Cazenove UK Smaller Companies fund managed by Paul Marriage and John Warren. He says: “Not only are the pair talented stockpickers, with a tried and tested investment process, but they are very strong on risk management, honed from also running a small-cap long/short strategy for many years.”
Ben Kumar, investment manager, Seven Investment Management:
The Old Mutual UK Smaller Companies fund is the choice for Mr Kumar, who says: “The management team has successfully kept a close eye on the risk of the fund delivering above average risk-rated performance over the life of the fund. In the passive space, we access the FTSE 250 index through BlackRock Mid Cap UK Equity Tracker fund.”
Tony Lanning, JPMorgan’s Fusion fund-of-funds lead manager:
The pick for Mr Lanning is Aberforth UK Smaller Companies, managed by Andy Bamford. Mr Lanning explains: “We like the strong value bias of the Aberforth fund, they are UK Small Cap specialists and its manager Andy Bamford is very strict value-orientated investor.”
