Small can still be beautiful for selective investors

small caps

The neglect effect, where mainstream investors shunned smaller caps because of the bear market, led to this year's rally. But while it has largely played itself out, there are still good opportunities to be found

So far, 2003 has been the year to be invested in small cap companies. In the US, Japan, Europe and the UK, smaller companies have significantly outperformed their larger cap counterparts. This current run of small-cap outperformance really started in early 2000. The bursting of the TMT bubble led to a surge in the relative performance of global small caps that has lasted three years and has gained increasing momentum this year. The so-called 'neglect effect' was the main factor driving this. In the rush to become technology experts, many investment banks chopped their small cap teams entir...