Small caps have historically performed well in rising rate environments, even outpacing large caps.

Average 12-Month Performance When 10-Year Treasury Rates Are Rising and Falling (Since 1980)

Why it Matters

If interest rates rise resulting in price to earnings multiples and profit margins peaking, avoiding marginal companies with a greater emphasis on high-quality companies trading at attractive prices will be increasingly important. We are already seeing this play out in the Russell 2000 Index where one-third of the stocks in the Russell 2000 have not been profitable in 12 months, a level normally only seen in recessions.

Source: Strategas Research Partners, 2017. Past performance is not indicative of future results.

Take Action: Learn More About Our Approach to Small Cap Investing

3.1%

Annualized Alpha Since Inception
Using net of fees returns vs. Russell 2000 Value

86%

Down Market Capture Since Inception
Using net of fees returns vs. Russell 2000 Value

95%

Active Share
High-conviction portfolio focused on 50 to 70 holdings

Top Decile

Percentile Ranking
Total net return performance in U.S. Small Cap Value Equity Universe since inception

Westwood SmallCap: Key takeaways

A high-quality approach to small cap investing could be a way for investors to strategically allocate to the asset class in an attempt to improve consistency over the long term.

 

High-Quality Focus

We believe high-quality businesses that are operating well with undervalued earnings potential offer competitive risk-adjusted returns.

 

High-Conviction Investing

Focused best ideas portfolio with historically high active share. Number of securities typically ranges from 50 to 70.

 

Team-Based Approach

Our strategy utilizes a team-based fundamental bottom-up approach to identify high-quality companies.

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