UK small caps have passed through the recent correction almost entirely unscathed. In contrast, the Russell 2000 has underperformed the S&P 500 by 200bps over the same period. This is curious. UK small caps had been lagging the mid cap index earlier in the year, both indices will be beneficiaries of the pick up in the domestic economy and small caps were trading on a discount. The index has benefited from what it doesn’t contain as much as what it does such as energy and mining companies. It has of course been a boon for UK active managers, of whom over 75% have outperformed so far this year.