SOMETIMES, smaller can be better. This is a concept investors in the United States have adopted over the past three decades because the returns of smaller capitalised companies have generally been outperforming their larger counterparts.
According to Chicago-based investment-consulting firm Ibbotson Associates, US$1 invested in a typical small US stock from December 1925 to June 1993 increased to $2,424.68, while $1 invested in a large stock grew to $762.45.
''Depending on the investor, if there is a role for equities in a portfolio, there is a role for small companies,'' said Keith Getsinger, a senior consultant at Ibbotson.
''There is terrific return potential but more risk. Investors need to be aware of the fact they are a long-term plan. Small companies are a big roller-coaster and you don't get big upside without some downside.'' In Hong Kong, the small company investment story has only recently started to attract serious attention as investors, who basked in the glow of higher blue chip stock prices last year, have begun to look for new vehicles that offer high returns.
If investors needed evidence of such potential gains, the 208.6 per cent jump posted by Jardine Fleming's Eastern Smaller Companies Trust and the 125 per cent rise of GT Management's Asian Small Companies Fund were sufficient.
And with an increasing number of US investment houses which have extensive experience of investing in small companies establishing offices in Hong Kong, interest among investors is bound to grow.
