George Ensor, manager of River and Mercantile UK Micro-Cap (RMMC), says the unprecedented outflows from UK smaller company funds in the past two years could become an important catalyst for small-cap trusts like his when investor sentiment improves.
This is the third excerpt from our recent virtual event with Ensor and River Global, the fund management group formerly called River and Mercantile.
Can’t watch now? Read the transcript
George Ensor:
This is going to be the catalyst. A lot of people say earnings estimates are the catalyst. The market tends to trough six months before earnings inflect positively. Flows will be the driver. The staggering thing on this slide is the change in the AUM [assets under management]. So, this actually shows the open-ended small-cap universe. At the end of 2021, those small-cap funds – I think there are about 75 or 80 – had a collective AUM of £19bn. If you fast forward to the end of last October, that was £9.2bn. So those funds have, in aggregate, more than halved the AUM that they run. It’s been driven by performance and outflows from UK smaller companies’ funds. The longer-term track record is there on the bottom right. It’s often a couple of months positive, couple of months negative. Short swings. We’ve had this long unprecedented cycle of outflows.
