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 smaller companies in the United Kingdom.

The main Numis index is the NSCI (the Numis Smaller Companies Index). The NSCI covers the bottom tenth by value of the main UK equity market. It is unique in having been calculated on a consistent basis over 58 years, from 1955 to date. The NSC plus AIM index adds in AIM stocks that meet the NSCI size limit. The NSCI ex-investment companies screens out investment instruments. In addition, the Numis 1000 index targets the bottom two% of the UK market, on an ex-investment companies basis.

Over 2012, the NSCI gave a total return of 25.7%, compared with the FTSE All-Share return of 12.3%. The NSCI ex-investment companies returned 29.9%. During 1955–2012, the NSCI gave an annualised return of 15.3%, which is 3.4% above the FTSE All-Share; and the NSCI ex-investment companies returned an annualised 15.5%.

During 2012 the Numis 1000 provided a return of 23.6%, which is 11.3% above the FTSE All-Share. During 1955–2012, the Numis 1000 gave an annualised return of 16.8%, which is 5.0% above the FTSE All-Share.
At the start of 2012, the NSCI has 751 constituent companies, 389 of which are non-investment companies. The NSC plus AIM index has 1840 constituent companies. The Numis 1000 index has 593 constituent companies.

At the turn-of-the-year rebalancing date, the largest NSCI constituent (Debenhams) had a market capitalisation of £1428 million, while the largest company in the Numis 1000 (Greggs) was worth £461 million. The average market capitalisation of NSCI companies is £267 million; for the Numis 1000 it is £121 million.

The main market versions of the Numis indices emphasize industrials and investment instruments, which together comprise almost half the NSCI index, and well over half the NSC 1000. In relative term, the Numis indices are overweight in industrials, technology, and investment instruments. They are especially light in oil & gas, basic materials, consumer goods, health care, telecommunications, and utilities.

At the sector level, the NSCI and NSC 1000 have no constituents at all in forestry and paper, tobacco, or mobile telecommunications.

Individual index constituents have volatile share prices. While a diversified portfolio of NSCI constituents has historically had similar variability to the 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 2013, the net dividend yield on the NSCI was 2.75% (ex-investment companies, 2.76%), and the P/E multiple was 15.06 (ex-investment companies, 12.80). The net dividend yield on the NSC 1000 was 2.74% (ex-investment companies, 2.84%), and the P/E ratio was 14.75 (ex-investment companies, 10.32).

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 Documents

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)