Grasping the reasons behind the subpar performance of Small Cap Value funds is essential for investors dealing with market changes. Companies classified as 'Small Cap' usually have a market capitalization below €2 billion. These firms are often viewed as nimbler but can be subject to greater volatility and market shifts. Conversely, "Value" denotes an investment approach that focuses on stocks perceived to trade below their actual worth. Ideally, Small Cap Value funds aim to merge these strategies by targeting potentially undervalued small companies capable of bouncing back. However, these funds saw a weekly loss of 1.70%, putting their year-to-date performance at +0.70%. Despite this downturn, they managed to draw weekly inflows, amounting to $1.4 million.
Downturn in Weekly Performance
This week signified another instance where Small Cap Value Funds fell short in terms of performance. Investors considering these funds should take note of this ongoing trend since it has been consistent from the start of the year onwards. This pattern raises doubts about the feasibility of such investments given current market conditions and necessitates reevaluating investment tactics centred around this fund category.
Yearly Comparison Shows Deficit
When compared against their Large Cap equivalents, there's a noticeable shortfall with Small Cap Value funds. Large Cap funds generally invest in corporations boasting market caps above €10 billion – typically representing stable and well-established entities. Their performance has consistently outstripped that of Small Cap Value funds, indicating a substantial discrepancy in investor yields based on company size and investment strategy.
The SPDR® MSCI USA Small Cap Value Weighted UCITS ETF (LON:USSC), managing over €440 million in assets, experienced a weekly decline of 2.21%. Overall, the fund has amassed nearly €29 million in new investments since the start of the year, despite its modest performance.