Page 17 - DIY Investor Magazine | Issue 30

A COMPELLING LONG TERM ASSET CLASS
...European small cap have produced long term equity returns amongst the best in the world
Past performance is not a reliable indicator of future results
Source: Bloomberg. All series are rebased to 100 as at 31 December 1999 to 31 December 2020. All indices in GBP and include reinvested dividends. Indices do not include fees or operating expenses and are not available for actual investment. MSCI Europe Inc UK Small Cap index was launched in 2001, the data prior to that is back tested.
Just as attractive for investors is the fact that, although Europe’s smaller companies have outperformed over many years, the sector remains under appreciated and under analysed by the market.
This provides an opportunity for specialist active managers to take advantage of these market inefficiencies.
GREATER SCOPE TO PICK WINNING STOCKS
We believe the inefficiencies of the smaller company market and its lower sensitivity to the macroeconomic backdrop relative to larger caps offers greater opportunities for active stock pickers.
• Under-appreciated potential: A particularly powerful long- term consideration is the lower analyst/investor coverage across the European small cap universe, which we believe creates a less efficient market and more room for active managers to generate alpha.
GLOBAL COMPANIES RESEARCH COVERAGE
Source: J.P. Morgan Asset Management, Bloomberg, data as of 30 June, 2019.
17 DIY Investor Magazine | Sept 2021