For Scot Buzz

It was pleasing to read in the last issue that, like me, our Captain Bill is a big fan of small companies, reminding those prepared to listen that they are the lifeblood of a recovering economy. They create jobs, unlike their much bigger cousins, the "Blue Chips" who grab all the headlines, and actually destroy jobs.

Don't believe me?

Check the last twenty odd years.

Any politicians out there?

We know for a fact it's the case in the US where statistics show that over the last 25 years all net new jobs are down to small businesses, the smaller the better.

But the strange thing is, it's not only politicians who seem cold to the idea of supporting small companies, recent numbers show investors , institutional as well as individuals, are ignoring them too. Wonder why?

There's obviously an ingrained belief that, as a sector, "Small Caps" should be avoided at all costs. Let's face it, we hear constantly that anything to do with the stock market is bad.

I read recently that well known statistician Andrew Smithers still reckons stock market indices such as the FTSE are too high and have to be much lower before he'd consider investing. He's been saying that since the FTSE100 was as low as 3,500 a few years back.

Anybody noticed what it is now? Almost double, at 6,734.

Well, that's theory for you. It's worth remembering that good old Ronald Reagan once said, "Economists are folks who, when they see something working in practice, would say - 'Aah, but it wouldn't work in theory'".

Meanwhile, back in the surreal world, newspaper headlines, Bad News at Ten and other well-known purveyors of pessimism remind us daily why we need to be "safe". So even today in the developed world, trillions of pounds, dollars and Euros sit in places normally reserved for widows and orphans, not to mention Scared-y Custards. In the US recent figures show that ordinary investors are still running scared with $7 trillion in money funds (now there's a contradiction in terms - deposits to you and me), earning zilch.

And billions every month pile into absolute return funds as if another financial tsunami is round every corner. Horse bolted, anyone?

A Franklin Templeton survey this year demonstrates how effective pessimistic messages of continuing gloom have been. When asked what folks recall of stock market performances for 2009, 2010, 2011, and 2012, the majority said the first three years were flat or down, and a third said that about 2012. Hint - we've just had one of the strongest up markets ever since March 2009!

Look at the numbers, folks. And it's no fluke.

Gervais Williams , an experienced and successful small company fund manager, charts in his excellent Book Slow Finance, the dichotomy of the falling interest in investing in small companies and the recent outperformance of the sector, which he believes is the beginning of their renaissance as the outperforming long term investment sector .

Prior to the crazy credit boom since the early nineties, when banks threw money about, as my granny would say "like a man with nae airms", the beneficiaries of this fiscal madness were blue chips and homebuyers who couldn't afford the repayments. Small companies were locked out of the party. So their pre- eminence as the highest performing equity sector disappeared, as did interest in the sector by pension funds, big institutions and private investors. Small Caps are unloved and grossly under-owned by investors.

Various long haul surveys looking at performances of small cap sectors versus the main indices here and in the US, from 1900, 1929, or 1955 show the same results.

Small, not just Glasgow, is definitely smiles better. One example - from 1955, the sum of £100 invested in the average UK small company fund would have grown by 2010 to £324,800 (income re-invested, compared to £62,000 if invested instead in the FT All Share Index Total Return.

A shorter time frame? Harry Nimmo , the Lionel Messi of our Fantasy Fitba Team of Fund Managers, who's run the Standard Life UK Smaller Company fund since its launch in early 1997, has produced, after all charges , a gain of 760 per cent against the FT All Share Total Return of 190 per cent.

And over the last 12 months as Gervais Williams predicted, small cap funds, UK or overseas, are up in most cases way over 30 per cent net.

But of course as the theorists remind us, past performance is no guide to the future. Oh, and by the way, pigs might fly.