Exceptional returns from Britain’s small firms

Despite the downturn, UK small-caps continue to deliver for this successful for fund.

Despite the gloom surrounding the British economy, David Horner, co-manager of the Chelverton UK Equity Income Fund, is bullish about UK small caps. The £36.1m fund invests in high-yielding stocks from the bottom tenth of the stockmarket 64 of the 71 stocks have a market cap below £1bn.

The fund's three-year performance is "exceptional", says Patrick Collinson in Fund Strategy. It is up 66% over the period, compared with the 35% gain for the average UK equity income fund, placing it second out of 98 funds in the sector. "Small companies are very profitable and generating a lot of cash," Horner tells Fund Strategy. "They started repaying their debts five years ago and many have built up a lot of cash, with some paying special dividends, such as Micro Focus and Moneysupermarket.com."

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Moneysupermarket.com2.57%
Melrose2.33%
Tui Travel2.28%
Micro Focus International2.27%
Menzies (John)2.11%
Mecom Group2.08%
BBA Aviation2.05%
Brammer2.00%
RPC Group2.00%
Beazley1.98%
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