Mind the Cap: Revisiting Small Cap Equities

IN THIS PAPER

Valuation, performance and re-rating potential: After lagging large cap indices for more than a decade, small cap stocks are now trading at historically steep discounts. But does this signal a buying opportunity or a deeper structural shift?

Active manager opportunity and alpha dispersion: The report analyses the distinct characteristics of the global small cap manager universe, including relative performance, style orientation, benchmark alignment, and capacity constraints.

Practical implementation; sizing, style and structure: From choosing between global and regional strategies to understanding benchmarks, ESG integration and liquidity dynamics, we unpack the critical considerations that should shape portfolio design.

WHY DOWNLOAD?

Small cap equities have been largely left behind in the past decade’s rally, eclipsed by mega-cap growth stocks and excluded from the bulk of passive fund flows. But in 2025, market conditions are shifting: macroeconomic indicators are stabilising, breadth is improving, and there are signs that the long-standing imbalance between public and private equity markets may be evolving.

For asset owners, this raises a fresh set of questions. Is the small cap discount now an opportunity? Are investors inadvertently doubling down on private exposure while neglecting the listed equivalent? And how should small cap allocations be implemented in a way that preserves alpha and withstands capacity limitations?.

This report explores those questions and more, focusing particularly on global small cap strategies. The paper provides insight into manager performance dispersion, portfolio overlap, benchmark misalignment and ESG integration—all of which can have a material impact on returns.

We hope the findings and frameworks outlined in this report offer a timely and valuable perspective for investors assessing small cap equity.