Oriel said that since hitting all-time highs at the end of February the FTSE Small Cap (ex-IC) Index has fallen by 6.0% and the FTSE 250 Index has fallen 5.3% whereas the FTSE 100 has remained at a similar level.
The indices are now showing a ‘divergent pattern’ following a period of very strong performance from UK small and mid-caps, which over the past three years have seen increases of 61% for the FTSE Smaller Companies TR index and a 41% gain for the FTSE 250 TR, versus a FTSE 100 TR up 26% over the three years.
According to Oriel this correction in the valuations of small and mid-caps has been accompanied by a ‘sharp move in discounts’ on investment trusts specialising in these areas, which creates opportunities for investors.
The average UK Smaller Company Investment Trust sector discount has risen from 7% to 12% between the end of February and 9 July 2014, for example.
Some individual trusts have moved even more even more such as the Henderson Smaller Companies shifting a 9% discount to 15%, Aberforth Smaller Companies going from from 3% to 11% and BlackRock Smaller Companies rising from 7% to 14%.
