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The manager of the £80m Ignis UK Smaller Companies fund dismissed fears over interest rate rises and government deficits, saying there were many small-cap names that would deliver stellar growth this year.

“I get that the macro picture is not all beer and skittles, but there are opportunities for some predictable profits growth.”

The manager said the small-cap space was once again being driven by stock fundamentals, as opposed to market sentiment.

“The yield curve is getting steeper, and that is always positive for small caps. And volatility is getting smaller.”

He said sectors like utilities, healthcare, energy, telecoms and financials were still attractive.

“There is room for growth-orientated small caps to do very well,” he said.

“The UK is still, in small-cap terms, under-researched. It’s difficult to come up with a scenario where it’s going to be tough for small caps.”

Mr Clark is targeting healthcare with stocks like staffing company Healthcare Locums, which he described as “recession-proof”.

The manager is favouring emerging markets through stocks like pharmaceutical group Hikma, which is launching products in the region. He also hopes for further improvements in the car market, betting on Vertu Motors.

He said small-cap fund managers had a torrid 2009, with nine of the 59 sector funds beating the benchmark index.

That is because several stocks – such as Punch Taverns and Yell – dropped out of the FTSE 100 and into the small-cap index after suffering in the first phase of the crisis in late 2008.

Because they were viewed as potential failures, they were not purchased by small-cap fund managers. However, when markets realised they would survive, their share prices rallied massively.

That boosted returns on the benchmark, which is now reporting a 79 per cent gain since March, leaving most small-cap managers behind.

Ignis UK Smaller Companies reports a middle-of-the-pack loss of 18.2 per cent over three years to January 4, according to Morningstar.

In June 2009, the manager told Investment Adviser he had missed some early market rallies and stayed too long in defensive stocks.

The average IMA UK Smaller Companies fund fell by 16.9 per cent over the period, compared with a loss of 8.7 per cent from IMA UK All Companies funds on average.