As head of US smaller companies at F&C, his US Smaller Companies Trust has delivered a net asset value (NAV) return of 188%; while over the past three years his F&C US Smaller Companies Fund has returned 63%.
According to FE Analytics, his individual cumulative performance over the past five years is 119%, versus a peer group average of 91%. true
Still, whichever fund you look at, it is clear that US small caps have built up considerable momentum in recent months. Year to date, the IMA sector has climbed an impressive 35%, compared to 27% from the wider North America sector.
As it stands, Siddles will run US small cap portfolios alongside Sebastian Radcliffe, who looks after large cap US and global equity income mandates – including the £488m Jupiter North American Income Fund.
The to-do list
However, the firm does not currently field a US smaller companies fund in the retail space, so it will be interesting to see if this is something on its to-do list. It’s worth pointing out that James Clunie did not have a fund to manage when he agreed to join the firm from SWIP earlier this year, before it was announced he would be taking over from the retiring Philip Gibbs on Jupiter Absolute Return.
It will certainly be fascinating to see what input Siddles will have on Jupiter North American Income, certainly given Radcliffe’s commentary in September where he stated that with US treasuries still low, he is likely to be better served by “good quality stocks” to protect long-term purchasing power.
“All the more so with US multinationals with good financial health that are still reasonably valued and are likely to benefit from an unfolding economic recovery,” he added.
The possibility of a new fund will obviously depend much on client demand and a prolonged shift back to risk assets, and also whether global, not just US, small caps continue to deliver on their promise.
The long-term story
On a global scale, small caps have outperformed large caps in 10 of the past 13 years, according to research from Allianz Global Investors.
In its study ‘Is small beautiful?’ the firm points out that while the MSCI World Large Cap Total Return Index rose by approximately 80% between January 2001 and September 2013, the corresponding small-cap index almost tripled over the same period. Only in the years 2007-08 and 2011 did large companies fare better than small ones.
In North America the annual performance of small caps since 2001 has been 6% higher than that of large caps on average. In absolute terms, there was an average yield of 8 to 9% per year for small caps compared to an average of 2 to 3 % per year for large companies.
“On the one hand, many small caps are still in a growth stage. This results in a greater increase in profits and share prices and investors are thus rewarded for the greater risk inherent in small caps,” said Stefan Scheurer, senior capital markets analyst at AllianzGI.
“On the other hand, however, during crises and periods of heightened risk aversion, as investors flee, small caps underperform large caps. One reason for this is the lower liquidity of small caps because of their lower market capitalisations. That is what we saw when Lehman collapsed and during the eurozone government debt crisis.”
Despite the last-minute nature of the compromise to re-open the government and suspend the debt ceiling, why have markets been happy to ignore US political posturing?
