When I reflect on the Australian equities industry over a number of cycles, I believe that the small cap sector is still fundamentally misunderstood in terms of investor outcomes. Small caps are normally seen as either an opportunity for phenomenal growth outcomes – a way to add ‘spice’ to more conservative portfolios – or, as prone to absolute carnage and wealth destruction. It is uncommon for investors to see smalls as part of a sustainable long term strategy, for apparent good reasons… The small cap index has been basically flat over the last three years, during which time the broader ASX300 has gained over 9% per annum. Looking back further, over the last 10 years (as at 30 September 2015) the Small Ords Accumulation Index has delivered investors close to a zero return. It is no surprise then that investors push back when advisors recommend an allocation to small caps. What explains this underperformance of the small cap index? Read the full article (VIEW LINK)
It's interesting to see how different the returns are when you strip out mining and energy companies and just look at small industrials. Unfortunately I've been unable to find the data publicly, but I know I've seen it before.