Over recent years, and over the long-term, small- and medium-sized companies have tended to outperform their larger peers, the logic being that most of the industry giants have already experienced the bulk of their growth.
Over the last decade, for example, the FTSE 250 index of medium-sized firms has outperformed the FTSE 100 by more than 100 percentage points, returning 253.74 per cent. Further down the market cap spectrum, the FTSE Small Cap index has also outperformed, but only by 10 percentage points over the last 10 years.
Performance of indices over 10yrs
Source: FE Analytics
The small cap index has surged ahead over the shorter term, performing in tandem with the FTSE 250 index over one and three years. Both indices have been well-ahead of the FTSE 100 over these periods.
However, Hooper says the fortunes of UK large caps are about to change.
In recent years, large caps have outperformed their smaller counterparts during periods of crisis such as 2008 and 2011. Large caps also outperformed ahead of the crisis in 2007 when small and medium sized companies actually lost money.
Calendar year performance of indices
Source: FE Analytics
However, they also outperformed for an extended period in the 1990s, showing that being in mid and small caps isn’t always the right decision.
Hooper says the extended rally for small and mid cap stocks signals a buying opportunity for the larger companies that have been left behind.
"We’ve seen a two-tier market this year," Hooper said. "Mid and small caps have been the strongest performers, enjoying greater sensitivity to the global and domestic economic recovery."
"It’s the big ugly stocks that have been left behind, those stocks often known as the mega traps."
One area hit especially hard has been large oil and mining firms. Hooper says avoiding these sectors has been very helpful to managers seeking to outperform the UK market in 2013.
"However, tactically there is an opportunity to selectively add to some of these larger holdings ahead of 2014," he said.
"They have never been as relatively cheap and could prove more resilient should US tapering clouds return. The sale proceeds from Vodafone’s divestment of its US operations will also be looking for a home."
"We have been adding to the likes of Rio Tinto, BP and GlaxoSmithKline," he added.
Hooper’s views coincide with those of FE Alpha Manager Mark Costar, who recently told FE Trustnet that his weighting to mid caps had never been lower.
The manager is positive on UK stocks next year. He says the good news should continue because its companies are in great shape and he predicts further cash generation, capital returns, consolidation and a return to capital expenditure and earnings upgrades in 2014.
"Market bears currently fear US tapering, the debt ceiling impasse and a slowdown in emerging markets, and while we don’t expect the stellar returns of recent times, we do however remain positive on the outlook for UK equities," he said.
"Policy remains supportive and inflation is limited. The US economy is proving resilient, Europe is stabilising and the UK is rebounding strongly."
"We like to keep it simple: find good companies and stick with them," he added. "For a core portfolio it is more important to focus on core compounders which have great franchises. These stocks are not bound by size or sector, but rather the ability to deliver sustainable and growing returns."
Hooper highlights discount sporting goods retailer Sports Direct International and property listing website Rightmove as examples of some of these solid UK firms.
While the £240.2m AXA Framlington UK Growth fund has not shot the lights out, it has consistently outperformed the IMA UK All Companies sector and FTSE All Share.
Since Hooper took over the portfolio in December 2006, it has made 53.13 per cent, ahead of the FTSE All Share which gained 41.96 per cent. The average fund in the IMA UK All Companies sector picked up 39.69 per cent over the period.
Performance of fund vs sector and index since 2006
Source: FE Analytics
The fund is yielding 1.22 per cent.
It has exposure to some of the UK’s largest banks in its top-10 – HSBC and Lloyds.
In a further push into the largest end of the market cap, the fund has recently picked up holdings in aerospace leader Rolls Royce and insurer Prudential.
The highest sector weighting in the portfolio is to financials, at 20.23 per cent, but this is closely followed by exposure to industrial firms and services companies.
The fund requires a minimum investment of £1,000 and has ongoing charges of 1.62 per cent.