Gartmore forecasts that the earnings’ growth for large caps will be 7-8 per cent this year and for small caps 15-17 per cent. If these forecasts come true, small cap funds are still a bargain. Furthermore, the top smaller cap stockpicking managers have outperformed, on average, larger company managers by a long way. For example, over the past five years, the top-decile smaller company managers averaged gains of 88 per cent whereas the average for the top decile All Company managers showed returns of only 40.1 per cent as against the FTSE 100 index which fell by 10.3 per cent while the FTSE Small Cap index showed a rise of 3.4 per cent. Over 10 years the difference is even more startling. The top-decile small-cap managers averaged a 378 per cent rise as against the All Company managers of only 247 per cent. In that period, the FTSE 100 rose by 122.9 per cent and the Small Cap index increased by 122.5 per cent. The All Share managers who performed best also invested a proportion of their assets in smaller companies. Only four smaller company funds were consistently in the top quartile over one, two, three and five years. My two favourites are Roger Whiteoak’s, Framlington smaller UK companies and Giles Hargreaves’, Marlborough special situations. The two other excellent funds are First State British smaller companies and Investec UK smaller companies while Old Mutual UK select smaller companies, launched less than five years ago, has also been consistently in the top quartile over one, two and three years.