The small time: investing in small-cap funds can pay off big

Entrepreneur, July, 2005 by Dian Vujovich

When the world is your oyster, there are plenty of opportunities--particularly in the small-cap universe.

Thomas Ross, senior portfolio manager of the RCM Global Small-Cap fund (previously the PIMCO RCM Global Small-Cap fund; symbol RGSAX), has no trouble finding companies for his fund's portfolio. At the end of the first quarter, the broadly diversified portfolio held about 145 companies. Ross has been managing the top performing fund since 2001.

Investing in companies with long records of quality management can take away some of the risk of small-cap investing, but one risk Ross can't control is the length of a positive--or negative--small-cap cycle. In the U.S., small caps have been enjoying a hot run for a number of years. How long that run will last is anybody's guess. While the large caps are getting more attention these days, that's no reason to overlook the global small caps. In fact, a look at the RCM Global Small-Cap fund's holdings in late March showed some of the benefits of a global portfolio, as non-U.S. holdings were outperforming U.S. based ones.

While small caps can often be where the big money is, Ross thinks the fund is best for those who have an intermediate to long-term time horizon.

DIAN VUJOVICH is an author, syndicated columnist and publisher of fund-investing site www.fundfreebies.com