One of my favourite investment groups is international bond and equity specialist Guinness Flight Hambro. It has a good record of launching funds at the right time.
For example, in early 1994 it launched a global privatisation fund which is now one of the top performers in the international growth sector.
Guinness Flight now thinks the time is right for investing in smaller companies, and I agree with it.
Smaller companies as a group have underperformed during the equity bull market of the 1990s and now stand at lower valuations than the main index stocks despite better earnings' prospects.
Smaller companies also tend to generate better performances during periods when global growth is strong.
In particular, growth is now picking up in the continental European economies after a prolonged downturn which has resulted in many smaller companies being undervalued.
Smaller companies are also under-researched and so there are some good bargains to be had. Therefore, the launch of two smaller-company funds by Guinness Flight – global smaller companies and European smaller companies – is the right decision now.
Of the two, I prefer the European Smaller Companies fund. Guinness Flight is offering a 2 per cent discount on both funds until January 30, 1998.
I believe that well managed smaller-companies funds will outperform tracker funds over the next year or so because I think that the large-capital stocks have had a particularly good run and many of them are now overvalued in relation to smaller companies' stocks. I do believe that Guinness Flight has got the timing right again and that both these funds are worth a place in most portfolios.