BMO: The case for microcap investing

BMO’s Global Asset Management page has a very interesting write up on the case for microcap investing. They rightly point out that many asset managers stick to vanilla blue chip names, and miss out on the diversification available in microcaps.

Further down the article you see interesting information such as:

Benefit #1: Higher potential returns

We expect microcap to offer higher returns over the long run due to the high-returning nature of the asset class in combination with greater alpha potential:

• Higher returning asset class: According to the well-documented1 size premium, smaller companies tend to outperform larger companies over the long-term. Since 1973, microcap stocks have outperformed large cap stocks by more than 1% on an annualized basis.

Overall a very interesting piece and another reason to consider microcap universe an investment opportunity.

Link to the full page here.