Institutional Investors Turn to MicroCaps in Search of Alpha in Current Bull Market
Institutional Investors Turn to MicroCaps in Search of Alpha in Current Bull Market
In a recent post in Pensions & Investments, Christine Williamson shares that “Microcaps becoming a popular source in hunt for alpha.”
According to Williamson, “Institutional investors are developing a keen taste for microcap stocks such as Red Robin Gourmet Burgers Inc. and Tex-Mex specialist Chuy’s Holdings Inc. as they seek higher-return pockets in global equity markets.”
Key points of the article include;
– Total assets invested in microcap equity strategies increased 17.8% in the year ended Dec. 31 and were up 40% in the two-year period.
– Many large pension funds see microcap investments as a good way to generate ‘alpha’ due to market inefficiencies.
– A small number of microcap managers and sizable investment opportunities make microcaps a limited asset class for large institutions.
– Some institutions are turning to microcaps instead of private equity. According to Aoifinn Devitt, chief investment officer of the $2.7 billion Chicago Policemen’s Annuity and Benefit Fund, “the [microcap] asset class shares the desirable characteristics of private equity while avoiding illiquidity and transparency problems.“
Read the entire article HERE.