UK Smaller Companies was the top performing Investment Management Association (IMA) fund sector over 2013 with a return of 37.34 per cent, and a number of funds in this sector featured among the top 10 performing funds of 2013, reports Hargreaves Lansdown. River and Mercantile UK Equity Smaller Companies (GB00B1DSZR91), Unicorn UK Smaller Companies (GB0031791238) and CF Miton UK Smaller Companies (GB00B818N094) featured among the top 10 performing funds, with respective returns of 59.62 per cent, 56.54 per cent and 56.17 per cent.
Top performing open-ended funds of 2013
| Fund | Return (%) |
| AXA Framlington Biotech | 63.65 |
| Legg Mason Japan Equity | 63.65 |
| Legg Mason Capital Management Opportunity | 62.01 |
| Invesco Perpetual Japanese Smaller Companies | 61.56 |
| River and Mercantile UK Equity Smaller Companies | 59.62 |
| River and Mercantile UK Equity Long Term Recovery | 57.59 |
| Unicorn UK Smaller Companies | 56.54 |
| CF Miton UK Smaller Companies | 56.17 |
| Baillie Gifford Global Discovery | 55.76 |
| MFM Techinvest Technology | 55.04 |
Source: Hargreaves Lansdown/Lipper
Smaller companies in general did well, with Japanese Smaller Companies and North American Smaller Companies second and third best performing sectors with respective returns of 36.69 per cent and 35.87 per cent. IMA European Smaller Companies, meanwhile, came in fifth with 30.57 per cent.
Top performing IMA sectors in 2013
| Sector | Return (%) |
| UK Smaller Companies | 37.34 |
| Japanese Smaller Companies | 36.69 |
| North American Smaller Companies | 35.87 |
| North America | 31.38 |
| European Smaller Companies | 30.57 |
| Technology & Telecoms | 27.69 |
| UK All Companies | 26.13 |
| Japan | 26.1 |
| Europe Excluding UK | 25.97 |
| Europe Including UK | 25.31 |
Source: Hargreaves Lansdown/Lipper
Smaller companies also did well among investment trust sectors with Association of Investment Companies (AIC), European Smaller Companies, UK Smaller Companies and Japanese Smaller Companies featuring among the top 10 performing sectors, according to FE Trustnet data. They made respective returns of 47 per cent, 44.7 per cent and 38 per cent. These sectors include IC Top 100 Funds Standard Life UK Smaller Companies Trust (SLS), BlackRock Smaller Companies Trust (BRSC), Henderson Smaller Companies Investment Trust (HSL), European Assets Trust (EAT) and Baillie Gifford Shin Nippon (BGS).
Top performing AIC sectors in 2013
| Sector | Return (%) |
| Japan equities | 56.4 |
| Tech Media & Telecom | 49.1 |
| European Smaller Companies | 47 |
| UK Smaller Companies | 44.7 |
| Litigation | 44.2 |
| Biotechnology & Healthcare | 43.2 |
| Country Specialists Europe | 40.3 |
| Japanese Smaller Companies | 38 |
| Property - Direct Asia Pacific | 37.9 |
| UK Equity & Bond Income | 35.3 |
Source: FE Trustnet
The important question for investors is whether the strong performance among smaller companies can continue.
"Overall, 2013 was a good year for investors," says Richard Troue, head of VCT Research at Hargreaves Lansdown. "Economic recovery has continued, both in the UK and across other developed economies. Most major stock markets have made solid gains, but smaller companies have stolen the show. If this pattern of recovery continues, with consumer, business and investor confidence improving, we see no reason why smaller companies can't continue to perform well in 2014."
