UK: Fund Raising - A new index should make small more attractive.

UK: Fund Raising - A new index should make small more attractive. - Small companies, long battered in the marketplace and spurned by banks and the stock market alike, can take heart thanks to some good news on the money-raising front. First of all, a new

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Last Updated: 31 Aug 2010

Small companies, long battered in the marketplace and spurned by banks and the stock market alike, can take heart thanks to some good news on the money-raising front. First of all, a new small companies index, the FT-SE SmallCap is to be launched in January. Credit Lyonnais analyst James Crouch says that "there are bound to be mutual funds setting up index linked trusts to match the new index. And the increase in demand will in itself stimulate better performance." An upturn in these shares will in turn mean better prospects for raising equity funds. The Hoare Govett small companies index is lagging the FT All Share by over 10%, but in a recovery the minnows tend to outperform - a selling point that will not be lost on investors. Secondly, the business introduction service LINK, which helps small companies find private investors, reports a leap in its success in marriage broking. This year it has found financial partners for every one in five of the firms on its lists, compared to a 2% to 3% success rate in the past. Thirdly, one can hope that the proposed float of venture capital provider 3i, which backs smaller firms to the tune of £400-£500 million a year, will enable the group to raise extra funds for new investments. However, 3i finance director Brian Larcombe says the limit on investments is generally more to do with a shortage of good companies than a shortage of funds.

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