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Numis Indices 2022 Annual Review

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Smaller UK Companies Outperformed Larger-Cap Peers in 2021 According to Numis Report

LONDON, 20th January 2021 - Numis, the independent investment bank, has today published the “Numis Indices 2022 Annual Review”, revealing robust outperformance of small and mid-cap UK companies, relative to larger-cap peers in 2021. 

The annual review, which analyses the full range of Numis indices, found that the NSCI XIC – i.e. its small cap index excluding investment companies – returned 21.9% over the year, while the NSC 1000 XIC – the Numis “minnows” index which targets the bottom 2% of the UK market, excluding investment companies - provided the best performance with a total return of 25%. This compares to the 17.1% return recorded for the Numis All Share Index.

The strength of small and mid-caps in 2021 and their 4.5% outperformance relative to the Numis Large Cap index, has ensured the long-term record of a positive size premium has been maintained. Measured over the 67-year history of the NSCI XIC, the size premium relative to large-cap companies stands at 3.6% per annum. For the NSC 1000, it is even higher – at 5.2% per annum. Over the long-term, small cap returns have been above large-cap returns in 41 of the 67 years since 1955. 

“While 2021 saw our indices hit all-time highs, it was the performance of UK small and mid-caps that once again stands out. Returns across the board have been remarkably strong, particularly against a backdrop of a global supply chain crisis, a surge in energy prices, the return of inflation and the rapid spread of yet another Covid-19 variant.”

Will Wallis Head of Research
Now in its 36th year, the Annual Review, written by Professor Paul Marsh and Scott Evans of London Business School, presents an in-depth analysis of the full suite of Numis indices. Following the launch of the Numis All Share index in 2021, the Numis family of indices represents the most comprehensive measure of the performance of low, mid and large capitalisation companies in the UK. The indices have a back history to 1955 and they provide a central part of the extensive range of research services that Numis provides to investors, as well as corporate clients.  

Perhaps the best indicator of the performance of UK small caps is the finding that a £1 investment in NSC 1000 XIC in 1995, subject to all dividends being reinvested, would be worth £26,480 by the start of this year. That’s over 20 times more than the £1,210 generated by the same investment in larger companies.”

Paul Marsh London Business School

The report also revealed:

  • The Numis Alternative Markets index which measures the performance of every stock listed on AIM was the worst performer in 2021, underperforming the Numis All Share by 9.5%. This is in stark contrast to last year’s report in which the Numis Alternative Markets Index was the star performer, outperforming the Numis All Share by 27%.
  • A better year for IPOs: 123 IPOs entered the UK market and hence the Numis Indices in 2021 – the second highest number in the last 15 years. 
  • Revival of dividends: The cuts in dividends in 2020, which ranged from −45% for large-caps, to −57% for mid-caps, were followed by increases of 30% and 84% in 2021. For the NSCI, the reversal in dividend cuts resulted in the largest one-year increase in real dividend payments on record (falling by 33% in 2020 and rising by 33% in 2021).

Along with small-cap outperformance, a notable feature of 2021 is the significant turnaround in dividend payments, following the largest annual cut to dividend income in 2020 in the history of the Numis indices.”

Scott Evans London Business School
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