Originally Posted by
KW
I mentioned to Liz that I dont think small caps are a place for fund managers. The market is too volatile, too illiquid, and too high risk to effectively enter and exit in a timely manner. First rule of thumb is to protect your investors capital - and you can't do that when small caps dive 20-50% in a few days and you have 10%+ of the company you need to sell. Look at TTN, AZV, RFL, GLH, and any number of other small companies that have disappointed this year and had their market caps halved or quartered by the market. In a bull market the returns are easy to come by, as the rising tide floats all boats, and towards the end of the bull run the riskier the growth the better. But in a bear market those same companies are going to get caned. Next year should be a shocker on the ASX as all the FY income downgrades hit the media in February. A fund manager is not truly tested until they meet a market downturn. PIE has yet to prove itself a stayer in bad times. What happens to the "stock pickers" when the safest place to be is in cash? (preferably US$ :-)