New Horizon Aircraft, doing business as Horizon Aircraft, has published new global research that indicates fund managers that invest primarily in small-cap and micro-cap stocks believe there will be an increased level of exposure to small and micro-caps from both institutional and retail investors over the year ahead.
The global study with small and micro-cap fund managers in the US, Canada, Europe, the Middle East and Asia with collectively USD82.4 billion assets under management, found that 76 per cent of respondents anticipate the level of exposure to small and micro-caps from institutional investors to increase over the next six to 12 months. One in three (34 per cent) fund managers believe allocations could increase by 25 per cent or more.
The findings also reveal that 83 per cent of fund manager respondents expect retail investors to increase their allocation of small and micro-caps over the next six to 12 months. Over half (52 per cent) of respondents believe that the allocation could increase by more than 25 per cent, and one in eight (12 per cent) believe that exposure to small and micro-caps could rise by more than 50 per cent.
One in three fund managers describe the current level of exposure from institutional investors to both small- and micro-caps as being underweight, with 21 per cent of respondents describing the allocation to micro-caps as being “slightly underweight” and 11 per cent describing it as being “extremely underweight”. Institutional investors’ current level of exposure to small-caps and micro-caps is described as being overweight by 4 per cent and 23 per cent, respectively. A similar picture is seen with retail investors, with fund managers describing this group’s allocation to small-caps and micro-caps as being underweight (32 per cent and 27 per cent, respectively) and as being overweight (17 per cent and 13 per cent, respectively).
Brandon Robinson, CEO of Horizon Aircraft, says: “Our research indicates that one third of fund managers believe that exposure to small and micro-caps by both institutional and retail investors is lower than it should be. However, with forecasted interest rate cuts and market conditions set to improve, fund managers are anticipating that investors will be looking to significantly increase their allocation to small and micro-cap stocks.
“As the economy rebounds, small and micro-cap companies can have a higher growth potential than large-cap companies due to their smaller revenue bases and their agility to capitalise on opportunities. This has historically made them more attractive to investors who are driven by the potential for high returns and greater earnings acceleration in the next 12 months.”
