The debate about the level of small company exposure in a portfolio has typically revolved around an assessment of their characteristics relative to large caps. However, an asset allocation decision based purely on analysis of the respective benchmark returns ignores the demonstrated alpha opportunity available for active investors over time. The cross-sectional volatility of small companies is materially higher than the S&P/ASX 100. The higher the dispersion of returns, the higher the opportunity to add value. Historically, active management has consi...