Guide to the Numis Indices
The Numis Indices are produced by Professors Elroy Dimson and Paul Marsh of London Business School.
Now in their 27th year of continuous publication, the Numis indices were launched at the start of 1987. Since then, they have provided the definitive benchmark for monitoring the performance of smallerUKcompanies. From 2012, the Numis indices have been a product of Numis Corporation. NSCI data and related research is distributed by Numis.
The main Numis index is the NSCI (the Numis Smaller Companies Index). The NSCI covers the bottom tenth by value of the mainUKequity market. It is unique in having been calculated on a consistent basis over nearly six decades, from 1955 to 2014. The NSC plus AIM index adds in AIM stocks that meet the NSCI size limit. The NSCI ex-investment companies (NSCI XIC) screens out investment instruments. In addition, the NSC 1000 index targets the bottom two percent of theUKmarket, on an ex-investment companies basis.
Over 2013, the NSCI gave a total return of 31.7%, compared with the FTSE All-Share return of 20.8%, an outperformance by the NSCI of 10.9%. The NSCI XIC returned 36.9%, an outperformance of 16.1%. During 1955–2013, the NSCI gave an annualised return of 15.8%, which is 3.5% above the FTSE All-Share; and the NSCI XIC returned an annualised 15.8%. During 2013, the NSC 1000 provided a return of 34.2%, which is 13.4% above the FTSE All-Share. During 1955–2013, the NSC 1000 gave an annualised return of 17.1%, which is 5.1% above the FTSE All-Share.
At the start of 2014, the NSCI has 715 constituent companies, 363 of which are non-investment companies. The NSC plus AIM index has 1796 constituent companies. The NSC 1000 index has 559 constituent companies. At the turn-of-the-year rebalancing date, the largest NSCI constituent (AZ Electronic Materials) had a market capitalisation of £1503 million, while the largest company in the NSC 1000 (Asia Resource Minerals) was worth £566 million. The average market capitalisation of NSCI companies is £326 million; for the NSC 1000 it is £155 million.
The main market versions of the Numis indices emphasize industrials and investment instruments, which together comprise virtually one-half of the NSCI index, and almost two-thirds of the NSC 1000. In relative term, the Numis indices are overweight in industrials, technology, and investment instruments. They are especially light in oil & gas, consumer goods, health care, telecommunications, and utilities. At the sector level, the Numis indices contain no tobacco companies at all, and additionally, the NSCI and NSC 1000 contain no forestry and paper and no mobile telecom companies.
Individual index constituents have volatile share prices. While a diversified portfolio of NSCI constituents has historically had similar variability to the FTSE All-Share, the relative risk of the Numis indices has crept upward in recent years. Smaller company returns are imperfectly correlated with larger company returns, and risk is reduced by diversifying across both segments of the market.
At the start of 2014, the net dividend yield on the NSCI was 2.31% (ex-investment companies, 2.19%), and the P/E multiple was 19.46 (ex-investment companies, 16.78). The net dividend yield on the NSC 1000 was 2.33% (ex-investment companies, 2.09%), and the P/E ratio was 20.78 (ex-investment companies, 16.00).
This year’s Annual Review provides a detailed analysis of the factors that had a dramatic impact on investment returns. In addition to sector influences, performance was impacted by style and factor exposures such as market capitalisation, value or growth orientation, risk exposure, and stock price momentum.
NSCI - Press Release (15 January 2014)
Q3 2013 Review (3 October 2013)
Q2 2013 Review (3 July 2013)
Q1 2013 Review (5 April 2013)
NSCI - Press Release (16 January 2013)
NSCI - LSE Survey (5 December 2012)
Survey of Numis Smaller Companies Index (NSCI) constituents (5 December 2012)
Q3 2012 Review (2 October 2012)
Q2 2012 Review (5 July 2012)
The Numis Smaller Companies Index (26 June 2012)