Small caps retake the lead


Small caps continue to outperform, luring in more players — or are they just pumping up the market?

Small-cap strategies, which have become a mainstream hedge fund play, have been outperforming their large-cap cousins for six years now. And while they had a brief setback during May, June and July, the strategy is back on track. A composite of small-cap hedge funds compiled by Absolute Return was up 1.24% in September, for a year-to-date return of 8.45%. Hedge funds big and small are continuing to pour money into the sector.

Managers like smaller names because