Thursday 25 March 2021
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According to new research by London Business School’s Paul Marsh, Emeritus Professor of Finance, and Scott Evans, Researcher, 2019 was a good year for smaller and mid-sized companies. Their research presents an in-depth analysis of the Numis indices and of smaller UK companies. This year represents the 65th anniversary of the NSCI making it the longest running UK small-cap index and the definitive benchmark for monitoring the performance of smaller and mid-sized companies in the United Kingdom.
2019 was a good year for small- and mid-caps. The NSCI hit an all-time high on the 27th December and finished the year with a total return (including reinvested dividends) of 22.3%, or 25.2% after excluding investment trusts (XIC). Over the 65-year history of the index, the annualised return on the NSCI is now 14.8%, which is 3.3% greater than the annualised return on the large-cap oriented FTSE All-Share.
Other findings from this year’s analysis:
Scott Evans and Paul Marsh the authors of the report, said:
“Our analysis of the longer-term trends of the NSCI provide many insights into what drives smaller companies returns. It has been fascinating to see how the NSCI has changed since 1955”.
The chart below is from the 2020 NSCI Annual Review. It shows that UK equities, as measured by the FTSE All-Share, handsomely beat both gilts and treasury bills (cash) over the last 65 years. Small-caps, in turn, greatly outperformed the large-cap oriented FTSE All-Share. Within the Numis family of small-cap indices, it was a case of the “smaller-the-better”. The NSC 1000 minnows beat the NSCI small-caps, which in turn, beat the Numis Mid Cap.
The NSCI and comparative long-run returns
Notes to Editors
About the Numis Smaller Companies Index
The NSCI covers the bottom tenth by value of the main UK equity market. It is unique in having been calculated on a consistent basis over the 65 years from 1955 to date. At the start of 2020, the NSCI contained 696 companies, the average market capitalisation of its constituents was £375 million, and the index’s largest constituent (Worldwide Healthcare Trust) had a value of £1,678 million.
The Numis index family also embraces versions that include AIM stocks, and that focus on minnows, mid-caps, or exclusively on AIM. All are available as both price and total returns indices, and both including and excluding investment companies.
About the Authors
Scott Evans is a researcher at London Business School. Previously he worked in investment banking for several financial institutions including UBS, Merrill Lynch, and ABN AMRO/RBS. He has also been a lecturer in economics at Oriel College, Oxford, a visiting lecturer at Birmingham and Brunel Universities and an Economist at the Institute for Fiscal Studies.
Paul Marsh is Emeritus Professor of Finance at London Business School and has previously served as Chairman of Aberforth Smaller Companies Trust and as a non−executive director of M&G Group and Majedie Investments. At London Business School he was previously Finance Chair, Deputy Principal, Faculty Dean and elected Governor.