Market inefficiencies in international small cap have allowed active managers to add meaningful value. Historically, adding small cap to an international allocation would have boosted returns with only a minor impact on volatility.
Source: FactSet. Past performance is no guarantee of future results.
TRAILING RETURNS (%) AND STANDARD DEVIATION ("SD") FOR THE PERIODS ENDED 12/31/18 1,2
|1 Yr||3 Yr||SD||5 Yr||SD||10 Yr||SD||15 Yr||SD|
|100% Int'l Small Cap||-17.89||3.73||12.86||3.06||11.89||10.51||16.62||7.29||17.63|
|30% Int'l Large Cap / 70% Int'l Small Cap||-16.66||3.49||12.28||2.33||11.66||9.29||16.36||6.58||17.05|
|50% Int'l Large Cap / 50% Int'l Small Cap||-15.84||3.33||11.93||1.83||11.58||8.46||16.24||6.08||16.74|
|70% Int'l Large Cap / 30% Int'l Small Cap||-15.02||3.15||11.62||1.32||11.57||7.61||16.18||5.56||16.50|
|85% Int'l Large Cap / 15% Int'l Small Cap||-14.41||3.01||11.42||0.93||11.60||6.97||16.17||5.16||16.36|
|100% Int'l Large Cap||-13.79||2.87||11.24||0.53||11.68||6.32||16.20||4.74||16.26|
|Russell 2000® Index||-11.01||7.36||15.79||4.41||15.30||11.97||18.36||7.50||18.30|
|S&P 500® Index||-4.38||9.26||10.80||8.49||10.85||13.12||13.55||7.77||13.44|
Source: FactSet. Past performance is no guarantee of future results.
1 International large cap and international small cap universes are respectively represented by the MSCI EAFE Index (MSCI EAFE) and the MSCI EAFE Small Cap Index (MSCI EAFE SC). An investor cannot invest directly in an index.
2 Standard deviation is used as a measure of an investment’s volatility. It calculates the variability of returns by comparing a mutual fund's return in each period with the average return across all periods.
Source: FactSet, MSCI, December 31, 2018.
Source: Morningstar, December 31, 2018.
Allocations based on total assets in Morningstar categories. Charts may not total 100% due to rounding.
Source: Strategic Insight; Foreign Small/Mid Blend, Growth, and Value Morningstar Fund Categories.
Return on assets (ROA)—An indicator of how profitable a company is relative to its total assets. Calculated by dividing a company’s annual earnings by its total assets.
Return on equity (ROE)—The amount of net income returned as a percentage of shareholder equity.
Historical earnings per share (EPS) growth—Historical growth of a company’s profit allocation to each outstanding share of common stock.
Long-term forward earnings per share (EPS) growth—Growth of forecasted, or estimated, portion of a company’s profit allocation to each outstanding share of common stock.
Price-to-earnings ratio (P/E ratio)—A ratio for valuing a company that measures its current share price relative to its per-share earnings.
Debt-to-equity ratio (D/E ratio)—A measurement of a company's financial leverage calculated by dividing a company's total liabilities by its stockholders' equity.
Source: FactSet, MSCI. As of December 31,2018. Past performance is no guarantee of future results.
Source: FactSet, MSCI. As of December 31, 2018. Past performance is no guarantee of future results.
1 Alpha, often considered the active return on an investment, gauges the performance of an investment against a market index used as a benchmark, since the benchmark is often considered to represent the market’s movement as a whole. The excess return of a fund relative to the return of a benchmark index is the fund's alpha.
2 International Small Cap Stocks with Positive Earnings Growth are all companies within the MSCI EAFE SC each calendar year that have increased their net earnings over the prior year. This universe of International Small Cap Stocks with Positive Earnings Growth is recalculated each calendar year.
All investments are subject to risk including possible loss of principal.
Investments in international securities are subject to certain risks of overseas investing including currency fluctuations and changes in political and economic conditions, which could result in significant market fluctuations.
Investments in small capitalization companies are subject to risks such as erratic earnings patterns, competitive conditions, limited earnings history and a reliance on one or a limited number of products.
Diversification does not guarantee a profit or protect against a loss in declining markets.
The MSCI EAFE Index (Europe, Australasia, Far East) is a free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the U.S. & Canada.
The MSCI EAFE Small Cap Index covers all investable small cap securities with a market capitalization below that of the companies in the MSCI Standard Indices.
The Russell 2000® Index is composed of the 2000 smallest stocks in the Russell 3000® Index and is widely regarded in the industry as the premier measure of small cap stock performance.
The S&P 500® Index is capitalization-weighted index of 500 stocks. The S&P 500 Index is designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.
Please visit msci.com for the most current list of countries represented by the MSCI indices.
Indices are unmanaged, are not available for investment and do not incur expenses.
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International small-cap stocks are often under-utilized in a portfolio. An allocation may offer investors the potential to generate higher absolute and risk-adjusted returns.Read Full Perspective
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