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Small-core holey fibers (HFs) can offer tight mode confinement, and are, therefore, attractive for highly nonlinear fiber applications. However, we show here that confinement loss can significantly degrade the performance of devices based on such small core fibers. We also identify a range of fiber designs that result in high fiber nonlinearity and low confinement loss. In particular, we show that pure silica HFs can exhibit effective nonlinearities more than 50 times higher than conventional fibers, and that the confinement loss can be lowered below the loss of standard fiber types.