European smaller companies – worth holding?

Linton

Alexland wrote: »

I'm with 'boring' Boston on this one. I have never seen any long term performance data to suggest that different cap sizes outperform a cap weighted index fund over the very long term. Sure there will be some 5 year snapshots or even whole cycles where one index has done better but is there anything to demonstrate strong probability of outperformance going forwards?

Alex

You could respond to any evidence which is presented to show you are wrong by simply saying the timescale isnt long enough. I cant really imagine what would constitute a demonstration of the strong probability of outperformance going forwards.


The very long term really is irrelevent for us retirees. We could die waiting.


All we have is historic data. 5 consecutive years demonstrating the outperformance of small companies in Europe is at least interesting. It is pleasing to have gained the benefit.

Alexland

dividendhero wrote: »

I suspect smaller companies do have a higher growth rate.."elephants don't gallop" comes to mind, but smaller companies will have a higher failure rate.

Maybe but where is the evidence? Who ever got disproportionately rich over 30-40 years owning a small cap fund? By comparison plenty of people have got rich with value or quality strategies.

Alex

aroominyork

Alexland wrote: »

Maybe but where is the evidence? Who ever got disproportionately rich over 30-40 years owning a small cap fund? By comparison plenty of people have got rich with value or quality strategies.

Alex

I think this is rhetoric, Alex. If anyone has invested solely in small cap I am sure there will be plenty who have got very rich. All you are pointing out, IMO, is that many more people invest solely in large cap than solely is small cap.

A_T

Don't know whether anyone has got rich by investing in it but in the last 17 years Old Mutual UK Smaller Companies has massively outperormed the FTSE All Share and FTSE Small Cap.

Would have been nice to know that 17 years ago

Alexland

A_T wrote: »

Don't know whether anyone has got rich by investing in it but in the last 17 years Old Mutual UK Smaller Companies has massively outperormed the FTSE All Share and FTSE Small Cap.

Although analysts reckon this is primarily due to stock picking skill it is true that over the past 20 years the average fund in the investment association UK Smaller Companies sector has turned £1,000 into £7,395 compared with £3,295 for the UK All Companies sector. OK maybe I will accept that is a particular problem with UK large company performance at the moment however I still don't see any evidence that small caps perform better over long periods in other geographies.

Which takes us back to the original question about if this is true in Europe?

Alex.

Linton

Alexland wrote: »

Although analysts reckon this is primarily due to stock picking skill it is true that over the past 20 years the average fund in the investment association UK Smaller Companies sector has turned £1,000 into £7,395 compared with £3,295 for the UK All Companies sector. OK maybe I will accept that is a particular problem with UK large company performance at the moment however I still don't see any evidence that small caps perform better over long periods in other geographies.

Which takes us back to the original question about if this is true in Europe?

Alex.

Over 20 years Aberdeen European Small Companies returned about 400%.
Over 20 years the FTSE Europe Index returned about 210%

The Aberdeen fund wasnt cherry picked, it was just the first one I found which has been around for 20 years. It actually substantially underperformed the Europe SC fund average which shows about 560%.

Convincing enough?

Alexland

Linton wrote: »

The Aberdeen fund wasnt cherry picked, it was just the first one I found which has been around for 20 years. It actually substantially underperformed the Europe SC fund average which shows about 560%.

Convincing enough?

Ok I will admit you are starting to convince me :-)

Alex.

aroominyork

Linton wrote: »

The Aberdeen fund wasnt cherry picked, it was just the first one I found which has been around for 20 years. It actually substantially underperformed the Europe SC fund average which shows about 560%.

What is the source of your 560% please?

A_T

Janus Henderson and Threadneedle have European smaller companies funds that have hugely outperformed indexes over long periods. I believe regional small cap is one area where it pays to go active and there is no point tracking the small cap indexes.

aroominyork

A_T wrote: »

Janus Henderson and Threadneedle have European smaller companies funds that have hugely outperformed indexes over long periods. I believe regional small cap is one area where it pays to go active and there is no point tracking the small cap indexes.

Can you point me to a small cap index? I don’t think there is any such thing.