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10 March 2017

QMA: Start of Something Big: Demystifying the Source of Large Alpha in Small Caps

Small cap alpha summaryIt is one of the most burning questions investors face today: Where can they find more alpha?

Small-cap stocks are regularly viewed as one of the markets’ most fertile sources compared to larger capitalization stocks. Across every geographic market, the median outperformance of active small-cap managers relative to their respective benchmarks over the last five years is significantly higher than for large-cap managers.

According to QMA Portfolio Manager Gavin Smith, the alpha opportunity arises from increased mispricings stemming from less investor attention, limited transparency and magnified behavioral biases. It is important to understand that alpha is no certainty, as small-cap investing comes with its own risks and costs. For consistent results, investors are best served with a disciplined and skilled manager at the helm.

To read or download the paper, please click here. To talk to Gavin Smith at QMA, contact judith.flynn@prudential.com.








 
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