Small UK companies will likely continue as a popular area for investment, says F&C Director of UK Small Caps, Catherine Stanley, but investors would be wise to be extremely selective, she warns.
According to Stanley, there has been a steady increase in the number of investment opportunities in the UK small companies sector. Latest figures show that net new quoted companies stood at over 300 last year.
Stanley predicts that many of these new companies are at the higher risk end of the spectrum, as often they are small, early stage businesses, which by their nature are illiquid and have unproven management.
In choosing which stock to put into a fund – especially when you have a limited number of stocks – Stanley warns it is essential to be extremely selective
“However we feel there are still many exciting opportunities which can form part of a risk-managed portfolio,” she says. “The flow of initial public offerings seems to be as strong for the first half of of this year as it was in 2005, and M&A activity has picked up over the last few months.”
Stanley says there is also considerable interest in the market in recovery situations, and there are more of these at the small end of the market.