Miton's Gervais Williams: Recession may favour 'immature businesses'

FTSE Small Cap down 15% year-to-date

Listed small-cap companies generating surplus cash may have the upper hand when the economy faces recession, as businesses in the sector look to acquire formerly leveraged entities, debt-free, at a cheaper price, according to Gervais Williams, manager of the Miton UK MicroCap Trust (MINI).

According to Williams, small-caps can "boost their future cash surplus" in recessionary periods, at which time "immature businesses" are sometimes able to sustain growth. "With global interest rates rising, we believe that economic conditions will become tougher. But alongside we also believe that these economic trends could favour the Miton UK MicroCap Trust," he said.  "Given that so few institutions have weightings in UK-quoted small- and micro-cap stocks, we believe that the new trend might be reflected in renewed capital allocations and outperformance that could surprise in terms...