Small-cap funds the big winners amid Brexit jitters

Have there been any stock market winners since the onset of Brexit mayhem? It’s been three years since the UK voted to leave the EU. That decision has brought dire warnings of trade disruption and economic slowdown.

The UK market has become the least favoured in the developed world. We are still none the wiser as to when we will leave, and how – if we are to leave at all. And as if the uncertainty has not been damaging enough to business and investor confidence, now there are fears of general election mayhem and talk of a further delay on EU withdrawal well into 2020.

Little wonder that billions have been pulled out of UK equity funds and trusts. And as if Brexit was not enough to discourage investors, the crisis that has befallen Neil Woodford – once the UK’S top-rated fund manager – with suspension of dealings in his huge Woodford Equity Income Fund, cautionary warnings have flowed about the perils of investing in micro-cap and unlisted companies.

So it is ironic that over the three years since the onset of Brexit, it is funds special

ising in smaller companies and micro caps that have produced stand-out performance.

The website FE Trustnet has looked back on these three years and the heavy toll that Brexit uncertainty has wrought on overall performance. While overseas markets continued to enjoy the benefits of ultralow interest rates since the financial crisis, UK shares have struggled.

According to FE Trustnet, the FTSE All Share index scored a total return of 30 per cent over the past three years, while the US bluechip S&P 500 index has risen by 69 per cent in sterling terms and the MSCI Europe ex UK index is up 45 per cent.

The pound has fallen by around 16 per cent against both the euro and US dollar over the same time. All told, three years on, performance among UK equity managers and sectors has been at best mixed. The Investment Association (IA) UK Smaller Companies sector achieved an average total return of 39.4 per cent. The IA UK All Companies sector has made a 26 per cent return, while the average IA UK equity income fund is up by just 19.7 per cent.

A closer look reveals that the 20 best performers are dominated by smaller company funds. The best performer since the referendum has been the TM Cavendish AIM fund, run by investment veteran Paul Mumford, with a total return of 111 per cent.

Other notable small-cap strategies include the £415 million Jupiter UK Smaller Companies fund, which has returned 79 per cent. And I was pleased to see the Baillie Gifford UK Equity Alpha fund and Standard Life Investments UK Smaller Companies Trust in the top 20 table, with gains of 58 and 5 4 per cent respectively.

At the bottom end of the performance table is the Woodford Equity Income Fund, having made a loss of 19. 7 per cent since the referendum. The L&G UK Alpha Trust is the second-worst performer, with a 6.2 per cent loss. Also near the bottom are several funds managed by Woodford’s successor at Invesco, Mark Barnett. promises, backed by impressive, but fake, credentials.” Cryptocurrency and forex scams are among the fastest growing areas of fraud. These often make use of fake celebrity endorsements on social media.

According to Action Fraud, complaints about these scams have trebled in the last year to 1,800, with reported losses totalling up to £27 million, an average of £14,600 per victim. Cryptocurrencies are a fruitful source of fraud. And pensions have been a particularly rich seam for fraudsters, with scams costing the average victim £91,000, and many have lost more than £1 million.

Among the warning signs are:

• Anything that looks too good to be true probably is – whether that’s an investment with incredible returns or an unbeatable bargain.

• Beware contact out of the blue. Any stranger offering an investment opportunity or unmissable deal should be avoided completely.

• Don’t believe without checking anyone who calls claiming to be from the police, your bank, HMRC or any organisation you have dealings with.

• Never give anyone personal details or account numbers when they’ve called, texted or emailed you asking for them.

• Never give anyone remote access to your computer as the result of a cold call or unsolicited message.

• Pressure should ring alarm bells. If you’re made to feel you need to make a decision in a hurry, this should be a signal you are being scammed.