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IN THIS PAPER
Dedicated small cap managers: While small cap exposure offers many benefits, one of which being increased diversification in what has been a rather challenging environment, research revealed that a majority of global small cap managers have outperformed the MSCI ACWI Small Cap since 2009 on a rolling three-year basis.
Under-exposure to small cap: Underweight positions in small cap remain a recurring theme in recent portfolio analysis, with the sector typically accounting for less than 10% of an investor’s portfolio, based on our client consulting experience.
Small cap manager universe: The number of managers offering expertise in ‘global small cap’ is on the rise, yet the accessible manager universe is renowned for its high turnover–from a manager selector’s perspective–as capacity constrained strategies are replaced by new offerings.
WHY DOWNLOAD?
Many institutional investors do not have dedicated exposure to small cap equities. In this paper, we consider the case for dedicated small cap allocations, particularly during the current period of low economic growth and heightened inflation, and key issues involved in implementation.
Such an argument can be bolstered by active manager performance in this space, which reveals that a majority of global small cap managers have outperformed the MSCI ACWI Small Cap since 2009 on a rolling three-year basis, even when an indicative 75bps management fee is accounted for.
This paper addresses some of the key concerns associated with small cap investing, takes a closer look at active manager performance by region and analyses factors that investors should consider when allocating to active strategies in this space.
Important Notices
This commentary is for institutional investors classified as Professional Clients as per FCA handbook rules COBS 3.5R. It does not constitute investment research, a financial promotion or a recommendation of any instrument, strategy or provider. The accuracy of information obtained from third parties has not been independently verified. Opinions not guarantees: the findings and opinions expressed herein are the intellectual property of bfinance and are subject to change; they are not intended to convey any guarantees as to the future performance of the investment products, asset classes, or capital markets discussed. The value of investments can go down as well as up.
