Companies listed in this index are generally between £700m and £5bn in size. The manager has a strict discipline and will not hold any investments within the portfolio that are not a part of the index. The FTSE 250 is reviewed quarterly to see which companies have made the move up to the FTSE 100 or down to FTSE Small Cap index.
The fund is managed by Paul Spencer, Mark Hall and Richard Bullas, who look to identify companies with strong balance sheets that are trading at reasonable prices, for long-term investment. They specifically target this part of the market due to long-term outperformance vs larger companies (over 5, 10 and 20 years), the diversification across sectors and the balance of UK vs overseas earnings (approx. 52% vs 48% respectively).
In a recent meeting Paul Spencer highlighted that concerns over Brexit have caused a significant divergence in the valuation of companies that generate earnings from overseas compared to more domestically focused names. They feel this gap has now become too large and are recycling some cash out of the top performing stocks into some of the more unloved companies which have been identified as good value.
Remaining focussed on quality companies and doing their own in-depth valuation assessments and growth forecasting has proved successful for the team, with annualised performance of 12% against 10% for the index. However, when investing into this area investors must be aware of the higher volatility associated with medium and small cap companies, and that historic outperformance does not offer a guide to future returns.