The primary home of micro-cap companies, AIM, has considerably evolved and expanded since its launch almost a quarter of a century ago. In particular, over the past decade – the lifespan of the LF Gresham House UK Micro Cap Fund – the market’s popularity has grown significantly.
With many smaller companies trading at sizeable valuation discounts to larger counterparts, smaller caps offer fertile ground for investors.
As this area of the market attracts less attention from professional research organisations and brokers, many investors are unaware that the UK is home to a vast number of high-quality smaller companies. This presents an opportunity for investors to back some fast-growing, innovative and disruptive firms.
The small and mid-cap market is regularly associated with high levels of risk and volatility. However, the reality is vastly different to the perception, particularly in the current market climate. As political uncertainty floods the UK market, many smaller companies are thriving against larger, more cyclical peers.
Ken Wotton, fund manager at Livingbridge Equity Funds explains why micro-caps are so often underestimated and misunderstood.