Microcap stocks soared last year, even by the inflated standards of the broad market. The CRSP Decile 10 Index (the smallest of the small in micro-cap land) surged more than 80% last year vs. a bit more than 26% for the S&P 500.
Why didn’t investors in funds targeting this slice of equities reap the lion’s share of the rewards? Rick Ferri of Portfolio Solutions explains the gap (hat tip to Mebane Faber’s World Beta blog). Ferri argues that microcap index funds “don’t exist, because micro-caps are too small for index funds and ETFs to invest in.”
We’ll have more to say on the subject in the near future in terms of what it means for multi-asset class investing. Meanwhile, you can read Ferri’s article at Forbes.com.