Small cap managers with an approved or above rating from Zenith Investment Partners have experienced an above benchmark return last year.
Zenith's 2012 Australian Small Companies Sector Review found that its small cap universe returned an average 20.6 per cent in the 2012 calendar year, which was 14 per cent above the benchmark return of 6.6 per cent.
"It is hard to believe the sector finished 2012 with a positive return of 6.6 per cent for the S&P/ASX Small Ordinaries Index for the year," Zenith head of research Bronwen Moncrieff said.
"Given the day-to-day economic headlines, the downturn in the resources sector, the subdued retail sector, let alone the ongoing monetary issues in the US and Europe, the modest return for the sector was encouraging."
The review found that while the resources sector was a significant component of the index - comprising 32 per cent as at 31 December 2012 - and that it significantly underperformed the industrial sector for the year, many Aussie small cap managers outperformed the index throughout 2012.
Zenith has said it did not find the result unexpected as its small cap manager universe has been significantly underweight in the resources sector.
This underweighting is due to small cap resources companies being traditionally under-diversified and exposed to a single commodity, making them volatile.
"We have observed a variety of responses from managers to investing in the resources sector over the past few years," Ms Moncrieff said.
"Some managers have shifted assets away from the sector into more defensive and yield focused areas.
"Some small cap managers who did not have specialist in-house resources expertise have screened out resource companies altogether, and other managers have added specialist resource research and portfolio management expertise to their team."
