How small caps can shine in difficult times

SMALL CAPS

Peter Ewins, manager of the F&C Global Smaller Companies investment trust, investigates the resilience of the smaller companies universe.

It is commonly believed small-cap stocks do badly at a time when economic growth wanes, and that investors should seek the security of large companies to protect themselves. However, the evidence of recent years suggests it would be rash to abandon small-caps at this stage. The collapse of Lehman Brothers in 2008 – and the subsequent move into the credit crunch and deep global recession the following year – led to significant falls in share prices across the market cap spectrum. The consequences of the collapse of wholesale funding markets proved dire for many banks. With other mega-c...