All areas of the global equity market have surged over the last few months, and Wood, who manages the five crown-rated McInroy & Wood Global Smaller Companies fund, says small caps are the place to be to get the most out of this rally. "I certainly do think that there are more opportunities in smaller companies," he said.
"I think when you invest in the likes of Vodafone or BT – because they are so well researched – I don’t think there is much chance that anyone can add any real value."
"Also, smaller companies don’t have much meaning to large institutions because they would have to take such a large holding if they wanted any exposure."
"We try and find companies that are unknown to the rest of the market or ones that are just too small for some of the larger institutions to bother with."
"Many smaller companies should continue to grow very profitably and, in the absence of a large institutional following, can be bought at relatively attractive prices," he added.
Overall, Wood thinks things look most positive towards the smaller end of the global equity market.
"There is the danger of people investing with momentum," he said. "Naturally, when markets look better people go down the scale and I am sure there has been increased interest around smaller companies."
"We have already seen it as prices have risen and the volumes of money pouring in have increased."
"As long as we don’t fall back into a global recession – which I think is very unlikely – I think smaller companies will continue to be a pretty good place to invest. However, I do expect that economic indicators are reflecting that."
He says that the current profitability of global smaller companies comes from an extended period of balance-sheet repairs.
"I don’t think the global economy is as bad as everyone has made out. People have been scarred by the economy in recent years, but now we have seen that companies' order books are full and business is strong."
"Other positives are that executives are picking up their capital expenditure as cash generation is very, very strong. This has meant that companies have been able to pay back their investors with special dividends, increased dividend yields and share buy-backs."
"That cash generation has been very important," he added.
According to FE Analytics, McInroy & Wood Smaller Companies is the top-performing fund in the IMA Global sector over the last decade, with returns of 355.96 per cent.
Performance of fund vs sector over 10yrs
Source: FE Analytics
McInroy & Wood Global Smaller Companies has also been top decile over three and five years.
Wood has headed up the fund since 2001, but stresses that a collective approach is taken to its management.
He says his team’s buy-and-hold mentality – its annual turnover rate is around 20 per cent – has been one of the major contributing factors to its long-term outperformance.
"Holding companies for a long time has helped us to outperform and keep our costs down," he said.
"We have a very experienced team and we might, over a year, look at five or 10 new ideas for the fund, but we maintain a very low turnover. Every one holding we add to the fund has come from a list of over 100 companies, for instance," he added.
A major theme in the portfolio at the moment is the fall in the value of sterling, which Wood says will favour export-led businesses in the UK.
"The UK has a number of world class industrials which are set so benefit from a weaker currency," he explained.
"We have always liked industrials such as Spectris and Rotork, but I come back to the point that we don’t benchmark ourselves."
"If we want high exposure to a company – or zero exposure – then we can do it. However, naturally we keep an eye on our fund's diversification."
Spectris and Rotork make up 2.8 and 2.5 per cent respectively of the £37.5m McInroy & Wood portfolio.
The fund’s total expense ratio (TER) is 1.61 per cent and it requires a minimum investment of £10,000.
Investors can access the portfolio via fund platforms such as Acentric, Nucleus and Transact.