Small-cap investors endured a strange 2012 with the FTSE Small Cap index performing creditably, but the Alternative Investment Market (Aim), dominated as it is by underperforming resources stocks, failing to make any progress. Indeed, the figures for the year to the beginning of December show the FTSE Small Cap index growing by an impressive 21 per cent but the Aim market down by 0.7 per cent. This compares with their larger cousins on the FTSE 350, up by 8 per cent and FTSE 100, up 6 per cent.
The FTSE Small Cap performance has been particularly impressive given the anaemic performance of the UK economy, when one might expect small caps to have underperformed. But a large number of constituents of the FTSE Small Cap index are actually in pretty good shape despite the state of the domestic economy, the mess our near European neighbours are in, the slowing growth in emerging markets and virtually non-existent bank credit in the UK.
The situation has not been quite so rosy on the Aim index, where the significant weighting towards the resources sector has hurt overall performance, as the wheels have come off the commodity supercycle. A peek at the performance of the different sectors on Aim over the opening 11 months of the year tells its own story with basic resources by far and away the worst performing sector with a 28.6 per cent reversal in value and oil struggling to keep its head above water with a gain of just 2.7 per cent. Contrast this with a stunning 77 per cent gain in the retail sector and a 76.6 per cent gain in the banking sector - although these two are helped by being home to a mere handful of stocks.