Five Facts about Small & Mid-Caps


Often referred to as "second-tier" companies, small & mid-caps offer many advantages. They can contribute to portfolio diversification. Five facts that every investor should know about Small & Mid-Caps:


Fact 1: Above-average return 

Small & Mid-Caps can offer investors a higher long-term return than Large Caps. This is shown by a comparison of the most important stock market indices for European equities in recent years.1


Fact 2: High diversity

The investable universe of Small & Mid-Caps comprises around 800 shares across Europe - of which more than 150 shares are listed in Germany alone.2 In addition, the stocks are spread across various sectors and industries, offering investors greater diversification potential.


Fact 3: Active management for excess returns 

Analysts and the public are hardly interested in small & mid-caps. This leads to information inefficiencies that can be exploited by portfolio managers (alpha potential). In particular, personal discussions with the management and company visits on site provide a good basis for selecting promising values for the portfolio.


Fact 4: Flexibility 

In contrast to the heavyweights on the stock markets, small & mid-caps can react quickly and efficiently to structural and economic changes. Mergers, takeovers and cooperation also offer promising opportunities in many cases.


Fact 5: Innovation 

Many of the Small & Mid-Caps are regarded as market leaders in their industry. They are often the source of innovation and disruption.


Based on comparison over 19 years (01.01.2000 to 30.08.2019): STOXX Europe 50 Return (20.01%) vs. STOXX Europe TMI Small Return (256.65%). Source: Bloomberg. Source: Bloomberg, May 2019



Oliver Böttger
Partner, Senior Relationship Manager