Small caps pack a large punch

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The Small Ordinaries index generated 9.53 per cent year last year, while the All Ords only climbed 7 per cent.

Lizard Investors, founder and chief investment officer, Leah Zell said it was because small caps have more growth potential and opportunity.

Zell was dubbed Forbes Magazine’s ‘the Small Caps Queen’. She said, if you were running a large cap portfolio and were eyeing pharmaceuticals, you only had five companies globally, maybe 10 to choose from.

Large cap companies are so large, there were limited in growth, said Zell. “Large cap companies can’t grow to the sky, whereas small cap companies have the ability to create their own markets. And they are often disruptors, they are often innovators and I think that’s really much more exciting way to invest”.

She add that small caps were also a way of adding alpha.

“Adding an opportunity to outperform. And therefore I would argue that they should be a permanent albeit satellite part of everyone’s portfolio”.

There had been an explosion of quality small cap companies, that were not known by investors, or even researched by brokers, and that represented an investment opportunity.

“So we have more choice, less coverage, under owned and greater opportunity to find what we are call fat tailed options or companies that are not either buyable or well known by the street’.