Since the start of the year, the FTSE 100 rose more than 210 points to sit about the 6,100 mark after the US put together a deal to avert its looming fiscal cliff. Over the same time, the FTSE 205 has added 415 points to reach an unprecedented 12,790.
Morris, the managing director of Signature, the discretionary arm of Rowan Dartington, said the likelihood of the FTSE 100 exceeding its own record – 6,950 points on 30 December 1999 – appears to be “some way off”.
“This difference in performance reaffirms the point we have long been making – investors need to broaden their investment arena in order to improve investment returns,” he commented.
“Limiting portfolios to investment within the top 100 quoted companies carries the risk of polarised investment that could potentially align investors too closely to the volatility risks associated with both commodities and financials.”
The FTSE 100 is dominated by oil and gas, basic materials and financials companies, which make up close to half of the index. The FTSE 250, with its greater diversity of businesses, is a “much nimbler” index, Morris added.
Funds focused on the FTSE 250 had a strong 2012 and delivered some of the IMA UK All Companies sector’s highest returns for the year.
Ed Legget’s £510.7m Standard Life UK Equity Unconstrained Fund, Mark Martin’s £48.4m Neptune UK Mid Cap Fund and Andy Brough’s £1.2bn Schroder UK Mid 250 Fund are among those that returned significantly more than the sector average in 2012.
