Smaller companies revival

ONE YEAR'S investment winners will often turn out to be next year's losers and vice versa, writes Maria Scott.

Investment trusts and unit trusts specialising in UK smaller companies have perked up recently. Gresham House is an investment trust that has a truly disastrous record - someone who invested five years ago would have lost practically all their money by the end of December.

But it emerges as the best performer in December with a 200 per cent rise in the share price.

However, the trust's manager, Alfred Stirling, is warning investors off. 'We have not done anything terribly clever,' he admitted. 'I have been trying to find out who is buying. It could be someone doing a straight punt.'

John Korwin-Szymanowski, an investment trust analyst at S G Warburg Securities, does not expect a wholesale advance in shares of smaller company funds this year. 'They will probably do better than the large company sector, but that is as far as I will go,' he said.

Emerging markets including those of the Far East will continue to do well, he said - a view echoed across the investment and unit trust industries.

Neither capital nor income shares of split capital investment trusts did well last year on average. Capital shares suffered from their lack of dividends at a time when investors were looking for income, while the income share sector suffered from oversupply. One of the lessons from last year's investment trust figures is the enormous disparity between the leaders and laggards. Investment trusts magnify gains and losses in their underlying assets because their shares reflect trends in the fund's investments.

Unit trusts give investors a direct holding in their assets and reflect their full value.

Aetna Unit Trust Managers has collected a wooden spoon for emerging from the 1992 performance tables with two unit trusts in the bottom five.

Local management of Aetna's Iberian Growth fund did not enable it to overcome the poor performance of the Spanish market. The index dropped nearly 12 per cent over the year, equivalent to 9 per cent in sterling terms.

Tony Zucker, director of overseas equities at Aetna, said the management of the fund has been moved back to London. The management and strategy of the Japan Growth fund is also under review following an ill-timed moved into second-line Japanese stocks.

------------------------------------------------------------------ Winners and losers in 1992 ------------------------------------------------------------------ Top five unit trusts % profit or loss Perpetual American Smaller Companies 83.58 Providence Capitol Thailand 64.07 Schroder US Smaller Companies 60.55 Gartmore Hong Kong 58.70 GT Orient 55.20 ------------------------------------------------------------------ Bottom five unit trusts Mercury Gold & General -19.38 Aetna Iberian Growth -20.58 S&P UK Smaller Companies Growth -20.90 Aetna Japan Growth -21.83 NM Japan Smaller Companies -22.99 Average 11.36 ------------------------------------------------------------------ Top five investment trusts JF Philippine 108.12 Pantheon International 81.00 Malaysian Emerging Companies 77.77 London American Ventures 77.42 First Philippine Ordinary 74.96 ------------------------------------------------------------------ Bottom five investment trusts Exmoor Dual-income shares (2001) -40.94 River Plate & Gen.- capital shares (1996) -47.17 Scottish National-capital shares (1998) -48.78 Contra-Cyclical-capital shares (2001) -61.90 Gresham House -66.67 Average 12.67 ------------------------------------------------------------------ Unit trust figures on offer-to-bid basis, income reinvested Investment trusts on mid-market price basis, income reinvested Source: Micropal ------------------------------------------------------------------