It is generally accepted that the small and mid-cap markets carry a higher level of risk than their larger counterparts but, if harnessed correctly, can also offer far superior returns.

One small cap fund that has produced superior short term and long term returns has been the Ausbil MicroCap Fund.

Over the past 12 months, the Fund has delivered a return of 22.1% – significantly exceeding both its benchmark index and the broader market.

More impressively, perhaps, is the fund’s long-term performance. Over the past three years the fund has returned 25.66% per annum and, since its inception in 2010, has returned 29.8% per year on average.

These are some pretty impressive results and, although past performance can never be relied upon for future performance, I think it can be useful for investors to look at how a successful fund manager is looking to generate its next period of outperformance.

In the fund’s latest April performance update, the company listed its top five holdings which included:

RCG Corporation Limited (ASX: RCG)

RCG is a holding company for a number of footwear and distribution businesses including The Athlete’s Foot. The company has shown phenomenal growth over recent years and expects to increase its FY16 earnings per share (EPS) by between 40-45%.

Hansen Technologies Limited (ASX: HSN)

Hansen Technologies is a leading provider of billing and software solutions for utilities, Pay TV and telecommunications companies. The company has a ‘sticky’ customer base, but has also been successful in acquiring new customers through international expansion and acquisitions. Hansen’s latest first half result revealed EPS growth of 31% over the prior corresponding period.

a2 Milk Company Ltd (ASX: A2M)

Most investors would be aware of the meteoric rise of A2 Milk considering its shares have increased by more than 260% over the past 12 months. Despite recent fears regarding regulatory changes in China, investors are still anticipating explosive growth for its infant formula and milk products.

APN Outdoor Group Ltd (ASX: APO)

Outdoor advertisers have been some of the best performing companies over the past 12 months and many analysts believe they have the ability to take additional market share away from traditional advertising sources. APN Outdoor smashed its 2015 prospectus profit forecasts by around 57% and is expecting to generate profit growth of around 20% in 2016.

Infigen Energy Ltd (ASX: IFN)

Infigen Energy is a developer, owner and operator of renewable energy generation in Australia. The company has an installed capacity base of 557 megawatts and a 1,100 megawatt development pipeline of large-scale wind and solar projects spread across five states in Australia. Although not consistently profitable yet, Infigen Energy is expected to benefit greatly from economies of scale and higher renewable energy prices over the next few years.

Although these were the fund’s top five holdings, the latest update did provide an interesting point regarding the recent outperformance of the small resources sector.

Many smaller resources companies have surged since the start of 2016 thanks to rising commodity prices but the manager does not believe this is sustainable with the exception of gold. Ausbil maintains that the current prices for many commodities are still too low for smaller players to prosper and has therefore maintained its low weighting to the sector.

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Motley Fool contributor Christopher Georges has no position in any stocks mentioned. The Motley Fool Australia owns shares of Hansen Technologies. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.