James Calder, research director at City Asset Management, says while a new sector is “probably” a good idea, the overriding issues are whether there are enough funds to create a decent peer group, and how the managers currently that have enjoyed top-decile positions from sitting in UK All Companies will stack up against each other in a more comparable sector.
He adds: “Really, there are such a large number of different mandates [in UK All Companies], it is not a particularly fair comparison.”
Excluding index funds, names that would likely move into the new category include Aberdeen, Allianz, Axa Framlington, F&C – through BMO Global Asset Management, Franklin Templeton, Neptune, Old Mutual Global Investors, Royal London, Schroders and Threadneedle.
While there are not that many funds that could accurately call themselves pure mid cap, Andrew Summers, head of fund research at Investec Wealth & Investment, says as a big part of the market it warrants its own category.
“Most of them could be called ‘smaller companies’, which use the Numis benchmark – the bottom 10% of the market that includes a fair chunk of the FTSE 250.”
As many funds benchmarked against the FTSE All-Share Index are overweight mid caps, he expects the mid-cap space effectively gets cannibalised by the FTSE SmallCap and All-Share indices.
“Let’s see what the new sector brings,” he adds.
