Small and mid-cap equities (SMIDs) have been an attractive source of returns over the past few decades, though they remain challenging for many investors to analyze and access effectively. In this report, we scrutinize the historical performance of SMIDs across the world and attempt to uncover drivers behind their outperformance. Our analysis shows that there has historically been a return premium available in smaller-cap stocks, and the fragmented nature of the market may provide more opportunity for skilled managers to drive alpha.
Key takeaways
- Despite strong returns over the past decade-plus, certain factors may make investing in large-cap equities more challenging looking forward.
- Global small and mid-cap equities have historically outperformed large caps.
- Additionally, SMIDs offer more opportunity for talented active managers to add value.
Global SMIDs vs. large caps
Cumulative total return
Source: MSCI, Bloomberg Finance, L.P., as of April 30, 2021.
