A new survey of wealth managers, fund managers and other institutional investors in the UK, who collectively manage USD140 billion in assets under management, reveals 76 per cent think small and micro caps will continue to outperform mid and large caps over the next six months.
The findings are from MBH Corporation plc, a diversified investment holding company listed on the Frankfurt Stock Exchange and the OTCQX in the US, which acquires successful, well established micro-cap and small sized enterprises across multiple geographies and sectors.
The research found that 84 per cent of professional investors in the UK believe micro and small caps are currently an attractive investment opportunity, and over the next 12 months 76 per cent expect investors to increase their exposure to these sectors. Some 11 per cent anticipate they will ‘significantly’ increase their allocation, and no respondents predict investors will reduce their level of investment in micro and small caps.
The research found that one of the main attractions of micro and small caps is that they have low correlations with large caps. In the current market environment, 67 per cent of UK based professional investors say this is an increasingly attractive feature. Over the next three years, 29 per cent expect micro caps to become even less correlated to large caps, but 11 per cent predict they will become more aligned.
Earlier research from MBH Corporation found the average growth of ten popular micro-cap indices in the 12-month period to 26 March 2021 was 90.89 per cent. The corresponding figures for the average growth of ten leading small cap, five mid cap and five large cap indices 73.78 per cent, 57.58 per cent and 45.03 per cent respectively.
Callum Laing, CEO of MBH Corporation plc, says: “Small and micro cap indices have enjoyed very strong growth over the past 12 months, outpacing mid and large cap indices.
“Smaller companies often benefit the most from hopes of an economic recovery and are the main winners when this starts. This, and the fact they can also be more nimble than larger companies during difficult times and adapt better, helps explain why micro and small caps are currently so popular with investors. Our research shows this optimism is not waning.”
MBH currently has 26 very successful and profitable small businesses in its portfolio and will continue its highly focused growth of well-established profitable small businesses across multiple geographies and industries.
MBH companies carry minimal debt, deliver around USD1 million to USD10 million EBITDA and are generally still run by their founders who become co-owners of MBH.
By leveraging its unique Agglomeration strategy, MBH can create substantial shareholder value through the consistent and accretive acquisition of excellent companies. With Agglomeration™, profitable companies convert their private shares into public shares or bonds in MBH Corporation plc in a perpetual earn-in model. Company owners are then incentivised to accelerate their growth trajectory using the resources of the plc including expertise, skill transfer of best-in-class practices, cross-selling to other group companies and where appropriate, zero cost funding for new growth projects.
Each group company retains its autonomy and follows appropriate corporate and financial governance. Business owners are also incentivised financially to enhance shareholder value through a share bonus scheme aligning their interests with public shareholders.