Larger Allocations to Smaller International Stocks

Larger Allocations to Smaller International Stocks

Moving down the international market cap spectrum has three potential benefits. Learn more.

Benefits of Investing in International Small Cap

Companies that reside in the lower end of the market cap spectrum are often more nimble, possess higher growth potential and have historically yielded strong returns. As such, small-caps in the U.S. have been a staple in a diversified asset allocation portfolio for some time. Yet international small-cap companies are often overlooked when building a client’s international equity portfolio, despite an attractive return profile. Clients that exclude international small-cap equities may thus be missing out on potential benefits – on both diversification and risk-adjusted return basis. 

Cambiar Investors believes that the inclusion of an actively managed international small-cap equity strategy can provide three beneficial features to a client portfolio:

  1. Enhanced Opportunity Set – The breadth and size of the international small-cap landscape greatly expands the number of unique opportunities available in an asset allocation model.
  2. Improve Risk/Return Profile – A diversified portfolio of international small-cap stocks has historically shown to generate similar returns with less volatility than international large-cap1
  3. Greater Diversification – International small-caps provide more targeted exposure to local economies that may be difficult to access through their large-cap brethren.

1Based on three and five-year performance versus standard deviation.  As of 12.31.2019

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Certain information contained in this communication constitutes “forward-looking statements”. Due to market risk and uncertainties, actual events, results or performance may differ materially from that reflected or contemplated in such forward-looking statements. Securities highlighted or discussed in this letter have been selected to illustrate Cambiar’s investment approach and/or market outlook and are not intended to represent the performance or be an indicator for how Cambiar’s portfolios have performed or may perform in the future. The portfolios are actively managed and securities discussed in this letter may or may not be held in client portfolios at any given time. Nothing in this letter shall constitute a recommendation or endorsement to buy or sell any security or other financial instrument referenced. The specific securities identified and described do not represent all of the securities purchased, sold, or recommended by Cambiar and the reader should not assume that investments in the securities identified and discussed were or will be profitable. Any characteristics included are for illustrative purposes and accordingly, no assumptions or comparisons should be made based upon these ratios. Statistics/charts may be based upon third-party sources that are deemed to be reliable, however, Cambiar does not guarantee its accuracy or completeness. Past performance is no indication of future results. All material is provided for informational purposes only and there is no guarantee that the opinions expressed herein will be valid beyond the date of this communication.