The Often Overlooked SMID Asset Class
SMID cap stocks have historically been underrepresented in traditional asset allocation models. Cambiar examines three reasons why this area can potentially add value to an asset allocation model.
Cambiar Investors believes a more diversified domestic allocation must include exposure to the small-mid (SMID) asset class. This area of the market can potentially provide:
- Higher Risk-Adjusted Returns – Similar to small-cap stocks, SMID stocks possess strong risk-reward characteristics.
- Lower Volatility – Medium-sized businesses typically offer a greater degree of stability than small-cap stocks.
- Larger Opportunity Set – The overall number of companies that fall within the market cap range, coupled with sparse analyst coverage, is an ideal backdrop for active management to take advantage of inefficiencies.
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