Time for the UK’s small companies to sparkle

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The UK smaller companies sector has outperformed the average investment company by 17 per cent over the last year, according to The Association of Investment Companies (AIC).

Research carried out by the AIC at a round table event in London suggests that, after a strong performance, a period of consolidation among smaller companies is anticipated.

Mike Prentis, portfolio manager, at BlackRock Smaller Companies and The Throgmorton Trust, said: “We see the prospects for UK small and midcaps as being attractive over the next few years.

“Data compiled by Hoare Govett, and more recently Numis, shows that share prices of UK small and midcap companies have handsomely outperformed their larger counterparts over the long term.

“These companies tend to do well as economies come out of recession and growth starts to accelerate; we believe we are at this stage now.”

Neil Hermon, the Fund Manager, Henderson Smaller Companies, added: “I place a great deal of importance on the quality and consistency of the stocks I buy.

“The best quality stocks are concentrated in the FTSE 250 area of the market – hence my mid-cap focus.

“Also, when running a large trust, it is very important that the underlying stocks have a good level of liquidity.”

The AIC was founded in 1932 to represent the interests of the investment trust industry.