Already a subscriber?Small-cap stocks appear to be finally outperforming their large-cap peers after years of lagging the ASX 200, bolstering hopes that large institutional investors will soon return to the smaller end of the sharemarket.
While small caps are traditionally sought to get exposure to higher-growth opportunities, they have failed to keep up with the rally in larger caps over the past few years, particularly against the backdrop of higher interest rates.The trend is more pronounced in the US, where 12 months of outsized gains from the so-called
“Small-caps are a higher risk, so over the last 18 months they sold off as you saw people go towards larger caps and defensive stocks.”Mr Ivers – who previously led small-cap research at Goldman Sachs and Citi – said signs were emerging that the long-awaited revival in the segment was picking up steam.“It does seem to be changing. Every other week, you’re reading about the invariable mean reversion of small caps,” he said.
“Since developed markets began rebounding in October, we really haven’t seen that sustained outperformance – it’s been spotty here and there – but we’re seeing a little bit more evidence of it recently.”Mr McMillan attributed the stop start performance to lingering concerns about the possibility of a recession in the US or Australia, as well uncertainty around the timing of rate cuts from major central banks.
“We’re having more and more conversations with our existing and prospective clients about increasing or starting an allocation to small caps – but there is that tentativeness,” he added. Among his stock picks are utilities software developer Gentrack , cybersecurity provider Ansarada Group , and radiology software company Mach7 Technologies .
Mr Shore, from American Century, said his global small-cap fund was betting on cybersecurity, along with companies exposed to the same