Inflows into European small cap funds surged to €8.7 billion ($US11.8 billion) in 2013, the report shows.

Exchange-traded funds domiciled in Europe enjoyed significant gains in the first five months of 2014, as €4.2 billion in net new flows in May brought the year-to-date figure to €17.6 billion, surpassing inflows for all of 2013.

So reports Cerulli Associates in the July 2014 edition of “The Cerulli Edge: European Monthly Product Trends.” The report explores the growing demand for European small cap funds, as well as trends in asset allocation, emerging market equity, alternative investments and fund of funds.

Inflows into European small cap funds surged to €8.7 billion ($US11.8 billion) in 2013, the report shows. And through April of 14, inflows ran to €5.0 billion, suggesting another strong year for small cap funds on the Continent.

“Like most equity bull runs, the recent surge in European stocks has seen more spectacular gains for smaller cap companies — and yet this may be the sector that will continue to offer the best opportunities for those fund managers prepared to dig a little deeper,” the report states. “Unlike [investment managers for] large-cap funds, small specialists have a real chance to diversify, to uncover hidden value and to differentiate their funds from competitors — even if there is more pain on the downside.”