COULD a new trend be emerging among investors that will see them put more capital into local small firms?

Gervais Williams, managing director of the Liverpool based investment firm MAM Funds, certainly thinks so. He outlined his view, set out in detail in a new book, that investment capital should be re-directed from the bubble markets of China and Eastern Europe to domestic businesses, in the process boosting local growth and employment.

In his recently published, Slow Finance, Why Investment Miles Matter, Mr Williams argues that the investment industry needs to rediscover old fashioned principles that saw investors put their money into small local firms.

He believes we are at a turning point and draws an analogy with trends in the food industry that’s created the slow food movement.

During a talk to MBA students and business people at the University of Liverpool Management School last week, Mr Williams explained: “The food industry has been through the same process of globalisation as the financial world.

“Food producers lost sight of their original purpose. They should be there to make nutritious food but they made food that looked good but had a high salt and fat content.

“Now, people take more of an interest in the ingredients and sourcing of their food. They want to find integrity – suppliers local to them that stimulate local employment.

“That period of passivity in the wider population is over. Equally, in the finance industry, people are going to want a greater say about how their assets are allocated.

“The business around the corner may be growing at a more modest rate but may be a bit more sustainable.

“There are so many investment opportunities around us that have effectively been starved of capital in recent years. So much of that capital has gone overseas and taken capital away from small and local firms.”

Mr Williams originally trained as a marine and structural engineer before switching to fund management in 1985, specialising in investing in small quoted companies. He spent most of his career working for Gartmore and has established a strong reputation for investment performance. Earlier this year, he became managing director of MAM Funds, formerly known as Midas Capital Partners. He believes the switch to a smaller operation means he has been released from the inevitable constraints of larger organisations.

Mr Williams argues that tighter credit conditions will mean lower house price growth in the future, forcing investors to return to equities instead. He said: “We have been in a period when credit has grown enormously and the way we invest has been hugely dominated by the appreciation of assets. The average house price has risen five times since 1985. Therefore people have not been so interested in companies.”

He also points to the fact that many people have been prepared to over stretch themselves with debt in order to stake a claim in the housing market. He added: “Over the period of the credit boom, many may have thought the more imprudent the better.

“It’s been a credit boom of such duration and magnitude that we have many investors who have not known anything else. They think it is normal asset price inflation, but in the real world it is not normal.”

Whether food industry trends transfer to investment remains to be seen. For that to happen, investors would have to accept lower returns.