Finding value in UK Smaller Companies

Finding value in UK Smaller Companies

This year has proven to be problematic for the UK Smaller Companies sector as investors have rotated out of small caps into larger and mega-cap alternatives. This has happened for a number of reasons, including some profit-taking following significant increases in the value of stocks in the mid- and small-cap areas.

Investors have become more nervous about geopolitical concerns once more, and about the weaker economic data which came from China and the US at the beginning of the year, which caused them to take more defensive positions. Another reason was the actions of hedge funds which had been shorting gilts (on the basis of potential future interest rate rises) and needed to close positions. To do this, they sold the stronger performing parts of their books to fund losses. Although the data has improved in the last few months, this has not, as yet, encouraged investors to support this area of ...