Outperformance in small caps is difficult to sustain

The small cap rally shows no sign of running out of steam although even small cap managers think it cannot continue at its current pace. In the year to date the asset class has risen some 33%, buoyed by the strength of the UK economy, ongoing corporate activity and the relatively cheapness of small caps. Catherine Stanley, UK fund manager at Framlington, says: "We are not going to see another 33% rise - that would be too much to hope for but over the year we expect small companies to outperform." A more cautious David Taylor, head of UK smaller companies at HSBC, adds: "Predictions are ...