What is a small company? We clarify the concept.

When we talk about small companies, there are different definitions depending on who you ask. The fund industry and the Stockholm Stock Exchange have different ways of categorizing companies based on their size. Let's break down the terms so you can easily understand the differences.

The fund industry vs. Stockholm Stock Exchange

To explain easily, you can imagine that we are talking about sizes of companies as different clothing sizes. The trustees and Stockholm Stock Exchange both have their own ways of measuring what are "small" and "medium" businesses - much like two clothing brands might have different size guides.

Fund industry definition:

The managers define their sizes based on the Stockholm Stock Exchange's total value, and they use percentages as their yardstick.

• Micro Cap Company: Companies that are less than 0.1 % of the Stockholm Stock Exchange's total value - i.e. companies worth less than approximately SEK 14 billion. These are like the smallest sizes in the store.
• Small companies: Companies that are less than 1 % of the stock market value, which means that they are worth up to approximately SEK 140 billion. They are significantly larger than the Micro Cap companies but still small compared to the largest companies on the stock exchange.

Stockholm Stock Exchange's definition:

The Stockholm Stock Exchange uses a completely different yardstick and bases its sizes on the companies' actual market value, instead of calculating as a percentage of the total market value.

• Small Cap (OMX Small Cap): Small companies are defined here as companies with a value below SEK 1.5 billion. So according to the Stockholm Stock Exchange, these companies are much smaller than what the management industry calls small companies.
• OMX Mid Cap: Companies with a value of up to SEK 11 billion end up here. It is Stockholmsbörsen's medium-sized company.
• Micro cap then? The Stockholm Stock Exchange does not have an official category for Micro Cap companies. It is thus a free territory for the fund managers to define!

The big difference:

In other words, if we follow the fund industry, a small company is much bigger than what Stockholm Stock Exchange would call a small company. The fund industry's "small companies" can be worth up to SEK 140 billion, while the Stockholm Stock Exchange's small companies stop at SEK 1.5 billion. So a size extra extra small (Micro Cap) in the fund industry can be larger than a size medium (Mid Cap) on the Stockholm Stock Exchange!

But here comes an important detail:

It also means that funds that invest in companies up to SEK 140 billion can still call themselves "small company funds" according to the fund industry - even though they often contain larger companies, far beyond what the Stockholm Stock Exchange would define as small companies. Many small-cap funds today have their holdings above the Stockholm Stock Exchange's 11-billion limit for Mid Cap, i.e. according to the Stockholm Stock Exchange, they would be Large Cap companies. 

Finserve Micro Cap - We invest in genuine small companies

Here's what does Finserve Micro Cap unique:

• Our strategy focuses on genuine small companies. We invest in companies with an average market value of approximately SEK 2.8 billion, which is significantly lower than the average for other small company funds.
• Low correlation with competitors. By targeting smaller companies, we create a portfolio that does not overlap with the larger companies in many "small company funds".
• Growth potential. We systematically identify companies that are still small enough to benefit from their size and grow quickly, which puts us in a unique position to generate higher returns over time.

Why choose Finserve Micro Cap?

Do you want to invest in companies that really fit into the small cap category, without the risk of getting a portfolio full of smaller large cap companies and large mid cap companies that small cap funds own? Then Finserve Micro Cap is the right choice for you. We aim to outperform the OMX Small Cap index by several percent annually by systematically finding and investing in companies with great growth potential.

Want to invest in genuine small companies before they outgrow their small company outfits? Then the Finserve Micro Cap fund is for you!