Just R6.4bn is now invested in the small-and mid-cap sector — not even 1% of industry assets. It is hard to remember that 20 years ago these were the hot funds that invested in ever more expensive IT and boutique financial services shares. Over the past five years, the focus has moved far more to the mid caps, which hardly resemble the 20 price-to sales-speculative counters of that time. In fact, the mid-cap index is a reliable war horse, beating most general equity funds over time. Large companies — such as Exxaro, Glencore, Massmart and Barloworld — have been in the index. If you follow academics such as US economist Eugene Fama and finance expert Kenneth French you will see that there is something called the size premium, as small-cap companies tend to outperform large caps over time: they can grow their earnings faster, though at the cost of volatility. This is also due to lack of industry research. There are many more undervauled and mispriced opportunities than in large caps a...

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