Size has provided little protection in the recent market rout. The appeal of large caps has historically been their defensiveness and their dividend payments, but does this still stand?

The received wisdom is that big may be boring, but it preserves your capital in the tough times. However, that assumption is looking increasingly unstable as size has proved no defence against the ravages of Covid-19.

As it stands, there is almost no discernible difference in performance between large-cap and small-cap during this crisis. For the year to date, the FTSE Small Cap index has dropped 20.7%, and the FTSE 100 index is down 20.9%. Perhaps more importantly, the FTSE 100 has been more volatile than its small-cap equivalent – showing a one-year volatility of 25.5% versus 23.9%.

If investors aren’t getting stability from their large-cap portfolio, what are they getting? The received wisdom that larger companies show slower growth has far more basis in fact – the five-year return for the FTSE 100 is 3.7%, compared to 16.9% for smaller companies.

Dividends might be another reason to turn to large caps, but here too, there are problems. Large-cap dividends have not proved reliable with around a third of the FTSE 100 having cut (and with more likely to cut from here). This would be less painful had investors seen strong growth in recent years, but as it stands, just five FTSE 100 companies have shown rising dividends over the past decade and still expect to grow their dividend by 2% this year.

This makes the argument for large caps look pretty weak. It should also prompt investors to question reliance on market-weighted passive options. While this has worked well in recent years, it is difficult to argue for a 10% weighting to oil and gas – as there is in the FTSE 100 – in a ‘future proof’ portfolio. It is less of a problem in the US, where the indices are focused on higher growth companies, but it is difficult to see the appeal of the UK’s largest companies in the current environment.

This may prove to be a key moment for investors. While no-one would suggest a wholesale re-engineering of portfolios in response to this crisis, they should reflect that the world post-Covid may be different from the world pre-Covid. Investors will need to decide whether they want their asset allocation to be based on past success when the future may look very different.