Josh McCathie, lead fund manager of the VT Downing Small & Mid-Cap Income Fund, has expressed optimism about the current investment landscape in the UK, particularly within the small and mid-cap sectors. McCathie points to the easing of inflationary pressures and interest rates as factors that could further buoy the market. The FTSE 250's current trading at a 22% discount to its long-term average, and a significant discount relative to the FTSE 100, presents a rare investment opportunity. Such conditions have historically preceded strong performances in small and mid-cap stocks.
Despite acknowledging the risks posed by geopolitical tensions, McCathie emphasizes the potential for higher returns in the small and mid-cap space. He cites expected earnings growth and attractive dividend returns as key drivers of this optimism. The VT Downing Small & Mid Cap Income Fund distinguishes itself by focusing exclusively on small and mid-cap stocks, a strategy that contrasts with funds targeting larger caps. McCathie also challenges the perception that smaller companies are solely growth-oriented, highlighting their overlooked dividend potential.
Marking three years at the helm, McCathie reflected on the fund's performance, noting its significant outperformance compared to other small-cap mandates and overall positive results, despite facing challenges in 2023. He advocates for the UK equity markets as a whole, pointing to the potential for robust returns and healthy dividend yields as reasons for investor optimism. For more information on investment strategies, visit https://www.vt.co.uk.
