If you’re brave enough to time the small cap cycle back and forth, you can rack up some great returns. Just be ready for an alternating performance cycle, says Jennifer Law, portfolio manager of Canadian small cap equities, CIBC Asset Management.

“In a year where equity is out of favour we do tend to underperform some,” she says, “but you’re not giving up on your yield as well.”

Small caps are highly cyclical, so once you hit the bottom of a recession, you start to outperform again. And then there’s a very powerful rally coming out of the recession.

“If you look at the three-year numbers,” says Law, “small caps have generated spectacular returns.”

She notes that from a style perspective value creation works well within the Canadian small cap context. The entrepreneurs at the companies issuing the stock are very growth oriented, whether it’s oil, mining or tech.

“They’re in it to grow,” she says.