Small Cap Allocation for Japanese Investors

For many years, the equity allocation of Japanese institutional investors has typically been split between domestic and international assets and tended to be concentrated in large and mid cap stocks. Given the constant challenge for investors to optimize the asset allocation mix to produce better risk-adjusted returns, one increasingly popular option has been to venture into small cap stocks. In fact, small caps have already attracted a lot of attention in the US, where institutional assets invested in international small cap have more than tripled in the last five years. Earlier this year, Japan's Government Pension Investment Fund (GPIF) also announced plans to start diversifying into small-cap stocks.