Small Cap exposure

MrTyo

Slowly plodding my way through understanding the world of investment. Using a generally passive approach (i appreciate some will argue re-balancing a portfolio/picking set funds is not really passive) most of the funds i have picked mainly focus on large cap companies so i was looking for a decent small cap exposure for a small part of a portfolio.

I was thinking of Baillie Gifford Global Discovery B Inc, does anyone have any thoughts or different recommendations?

Any advice offered will be well received!

Thanks

gadgetmind

I do use a Vanguard Small Cap tracker, but mainly get exposure to smaller companies via Investment Trusts. Their close-ended structure makes them a much better option for these less liquid equities and you can also pick them up on a good discount much of the time.

bigadaj

gadgetmind wrote: »

I do use a Vanguard Small Cap tracker, but mainly get exposure to smaller companies via Investment Trusts. Their close-ended structure makes them a much better option for these less liquid equities and you can also pick them up on a good discount much of the time.

A small cap tracker seems a bit of an oxymoron to me, unless it is achieved by means of derivatives. can any fund get he requisite diversification given the diversity and wuantity of companies making up this sector?

Linton

bigadaj wrote: »

A small cap tracker seems a bit of an oxymoron to me, unless it is achieved by means of derivatives. can any fund get he requisite diversification given the diversity and wuantity of companies making up this sector?

Also, if its a normal market cap. weighted index it will be dominated by the largest companies in whatever index is being used. Which surely isnt really compatible with the objectives of going for a Small Caps sector in the first place.

grey_gym_sock

a small cap tracker doesn't need to use derivatives, and the vanguard 1 doesn't. it can just buy every share in the index, in proportion to its market capitalization. companies with too large a capitalization won't be in the index.

it's much less dominated by the largest companies than a big cap tracker. the biggest holdings in that vanguard fund are about 0.2% of its value.

gadgetmind

Linton wrote: »

Which surely isnt really compatible with the objectives of going for a Small Caps sector in the first place.

The objective is to increase your exposure to small caps while keeping costs low. The tracker achieves this. Job done, move on.

OK, so you could argue that micro caps give even better performance, or active selection of small caps, but then you'd need to start doing some data mining to prove this. I'm happy just having a small tilt towards smaller caps via a low fee tracker.

I also hold some small cap overseas ITs but this was mainly because I bought on deep discounts and haven't yet got around to dropping my weighting back to neutral despite big gains.

gadgetmind

grey_gym_sock wrote: »

the biggest holdings in that vanguard fund are about 0.2% of its value.

Golly, so maybe we are seeing diversification, and maybe the largest holdings aren't dominating. Who'd have thought!