Institutional Asset Manager Newsletter 18.07.25

Small is beautiful

Gill Wadsworth writes this week on research from Citi and CREATE-Research which finds that the gap between mega and niche asset managers is widening.
I have managed to portmanteau our two main features this week, with a small dog image reflecting our piece from Gill Wadsworth on small cap stocks, as well as our In My Opinion from Aubrey Capital Management’s Tom Dalrymple on the not small at all growth in pet stocks.
Wadsworth reports that according to a new report from Bfinance, Mind the Cap: Revisiting Small Cap Equities, they have been out of favour for some time, but small cap equities could be back on the menu for institutional investors.
The sector is hugely undervalued following a period of outperformance from their large cap counterparts particularly in the tech sector, the firm says.
Robert Doyle Managing Director, Equity at Bfinance, says changing market conditions could see a major reversal in fortune for small cap stocks. Martha Brindle, Senior Director, Equity at Bfinance, says: “Historically, small cap stocks have outperformed during periods of economic recovery, particularly at early and mid-stage, due to the perceived cyclicality of the market. This is particularly true when industrial activity accelerates. We note signs of this across several developed and emerging markets, with inflation moderating, supply chain pressures easing, and real interest rates apparently stabilising.”
And back to the small dog. Dalrymple writes that the Chinese market, in particular, is growing fast with household pet ownership increasing from 59 million to 187 million from 2010 to 2024 as disposable incomes have increased and, amid declining birth rates, there is a growing demand for animal companionship. “As a result, the pet food industry is expected to grow at a CAGR of 7-12 per cent over the next three years as pet owners become more educated and interested in higher quality products for their furry friends. This has led to increased demand for an increasing variety of higher quality products.”

Beverly Chandler, Managing Editor, Institutional Asset Manager
For live updates please follow us on Twitter and LinkedIn.