Small firms returning to favour with investors

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The Independent Online

Small companies are winning back a following in the investment community after years of perceived neglect, according to a new survey.

A majority of companies now feel that there is sufficient liquidity for their listed shares and that they are well enough researched and recognised by fund managers.

The findings by the annual Reuters UK Smaller Companies Survey, carried out by Tempest Consultants, follow years of suggestions that small firms are overlooked by investors. But 49 per cent of finance directors questioned felt their company's value was fully reflected in the share price, an increase from 45 per cent last time.

The year to March showed a net inflow of £270m into small cap investment funds, according to Tempest, compared with a net withdrawal of £380m the previous year.

The FTSE SmallCap index, which excludes the UK's biggest 350 companies, has outperformed in the past year as fund managers have shunned telecoms and technology giants and looked for undervalued cyclicals, such as retailers, and solid, high yielding stocks. The FTSE SmallCap is down 4.8 per cent since the end of 2000, compared with an 8.4 per cent fall by the FTSE 100.

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