Embrace Economic Recovery with Cyclical, Domestic Small Cap Exposures
The uneven post-pandemic rally has led to elevated concentration in large cap indices. The rally has reached the point where investors may question if equity markets can rise further amid tapering and yield expansion. In this environment, small cap equities can offer a solution.
We believe that the current combination of economic recovery and tightening but still easy monetary policy could allow investors to extract value through small cap strategies that, when compared to their larger counterparts, are more cyclical, more domestic and potentially less sensitive to moderate yield expansion.
Small Cap indices not only offer cyclicality but they also vary significantly around the world given the underlying differences across economies. Value-weighted exposures allow for an even greater level of cyclicality.
We explore these themes in our latest article where we analyse the case for small cap exposure in different geographies.
Below we provide an overview of the different options investors have for gaining small cap exposure. Click through the ETF links to learn more about each fund, including full performance histories.
US Small Caps
The Russell 2000 Index allows investors to play cyclical recovery through higher exposure toward industrials and financials sectors relative to the S&P 500. Within financials, US small caps are naturally more oriented toward domestic, regional banks rather than global players. Heavy exposure to biotech affords investors a degree of structural growth as health care will likely remain in the spotlight even in the post-COVID world. The MSCI USA Small Cap Value Weighted Index is similar but with less health care and a higher cyclical and value tilt as financials represent more than a quarter of the overall exposure.
Broadly, European equities are supported by undemanding valuations, appealing spreads to local bonds and relatively solid COVID management across the continent. MSCI Europe Small Cap Index and MSCI Europe Small Cap Value Weighted Index each have heavy exposure to the industrials sector, which could prosper from the next leg of the recovery, namely investment. Financial companies may benefit from yield expansion and are a significant component of these indices, while real estate has significant room to catch up with the broader market if the reopening continues.
The MSCI World Small Cap Index allows investors to gain global cyclical exposure, combining the specific merits of smaller companies across the US (59% of the index) and Europe (21%). However, there is more to the exposure as the global index provides access to Japan (11%), which is itself a cyclical, export-oriented economy. In addition, Canada and Australia (3.4% and 3.3%, respectively) provide access to economies that are benefitting from high commodity prices.1
Emerging market (EM) small caps were one of a few parts EM universe that actually performed in line with developed markets. The reason behind this performance lies in the composition of the MSCI EM Small Cap Index. China represents only 8.7% of the index while it is 34% for a broader MSCI EM Index.2 Instead, Taiwan, India and South Korea make up 59% of the strategy. This exposure allows investors to enjoy growth from developing economies while at the same time mitigating some of the regulatory risk associated with China.
1,2Source: FactSet, State Street Global Advisors, as of 30 September 2021.
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For Investors in Austria: The offering of SPDR ETFs by the Company has been notified to the Financial Markets Authority (FMA) in accordance with section 139 of the Austrian Investment Funds Act. Prospective investors may obtain the current sales Prospectus, the articles of incorporation, the KIID as well as the latest annual and semi-annual report free of charge from State Street Global Advisors Europe Limited, Branch in Germany, Brienner Strasse 59, D-80333 Munich. T: +49 (0)89-55878-400.F: +49 (0)89-55878-440.
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ETF's worden verhandeld zoals aandelen, zijn onderhevig aan beleggingsrisico, fluctueren in marktwaarde en kunnen worden verhandeld tegen prijzen boven of onder de netto-inventariswaarde van de ETF’s. Brokercommissies en kosten van de ETF zullen het rendement verminderen. De wijzigingen in wisselkoersen kunnen een nadelig effect hebben op de waarde, prijs of inkomsten van een belegging. Verder is er geen garantie dat een ETF zijn beleggingsdoelstellingen zal behalen.
DE SPDR-ETF'S VAN SSGA ZIJN MOGELIJK NIET BESCHIKBAAR OF GESCHIKT VOOR U. DE UITGEDRUKTE MENINGEN/INFORMATIE OP DEZE SITE VORMEN GEEN BELEGGINGSADVIES, FINANCIEEL, JURIDISCH, REGLEMENTAIR, BOEKHOUDKUNDIG OF BELASTINGADVIES. BIJ TWIJFEL DIENT MEN STEEDS ONAFHANKELIJK ADVIES IN TE WINNEN. DE INFORMATIE NOCH ENIGE OPINIE OP DEZE SITE VORMT EEN VERZOEK OF AANBOD VOOR DE AAN- OF VERKOOP VAN AANDELEN VAN DE FONDSEN OF ENIG ANDER FINANCIEEL INSTRUMENT.Standard & Poor’s®, S&P® en SPDR® zijn gedeponeerde handelsmerken van Standard & Poor's Financial Services LLC (S&P); Dow Jones is een gedeponeerd handelsmerk van Dow Jones Trademark Holdings LLC (Dow Jones); en deze handelsmerken zijn in licentie gegeven voor gebruik door S&P Dow Jones Indices LLC (SPDJI) en in sublicentie voor bepaalde doeleinden door State Street Corporation. De financiële producten van State Street Corporation worden niet gesponsord, bekrachtigd, verkocht of gepromoot door SPDJI, Dow Jones, S&P, hun respectieve filialen en externe licentiegevers, en geen van deze partijen doen enige verklaring over de raadzaamheid om te beleggen in dergelijke producten, noch aanvaarden zij enige aansprakelijkheid in verband hiermee, inclusief voor fouten, weglatingen of onderbrekingen van een index.
SPDR-ETF's mogen enkel worden aangeboden en verkocht in rechtsgebieden waar dat is toegelaten in overeenstemming met de geldende regels.
Informatie met betrekking tot Mexico
Deze informatie is geen marketing of aanbieding van effecten en is niet ook niet zo bedoeld, en mag bijgevolg niet als dusdanig worden opgevat. De fondsen waarnaar in dit document wordt verwezen, zijn niet en zullen niet worden geregistreerd onder de Mexicaanse wet op de effectenmarkten (Ley del Mercado de Valores) en mogen in Mexico niet aan het publiek worden aangeboden of verkocht. De documentatie met bekendmakingen in verband met een van de bovengenoemde fondsen mag niet openbaar worden verspreid in Mexico en aandelen van de fondsen mogen niet worden verhandeld in Mexico.
SSGA SPDR ETFs Europe I Plc en SSGA SPDR ETFs Europe II Plc zijn beleggingsmaatschappijen met variabel kapitaal opgericht als fondsen met afzonderlijke aansprakelijkheid tussen de compartimenten volgens de wetten van Ierland en erkend door de Central Bank of Ireland conform de Europese verordening van 2011 over instellingen voor collectieve belegging in effecten. U moet het prospectus en de essentiële beleggersinformatie (KIID) met betrekking tot specifieke SPDR-ETF's aanvragen en zorgvuldig lezen alvorens u belegt. Voor meer informatie en het prospectus/KIID met de kenmerken, kosten en risico's van SPDR-ETF's kunt u nu een prospectus of KIID downloaden, of kunt u deze documenten verkrijgen bij uw financieel adviseur of bij uw lokale SSGA-kantoor.
De in de VS gevestigde SPDR-ETF's die op deze site worden vermeld, zijn enkel toegelaten voor commercialisering in het relevante EER-rechtsgebied conform artikel 42 van de AIFMD (zoals omgezet in nationaal recht van die lidstaat); of kunnen anderszins rechtmatig worden aangeboden of verkocht (inclusief op basis van een verzoek van een professionele/gekwalificeerde belegger). Enkele in de VS gedomicilieerde SPDR-ETF's die op deze site worden vermeld, zijn alternatieve beleggingsinstellingen in de zin van de richtlijn van de Europese Unie inzake beheerders van alternatieve beleggingsinstellingen (Richtlijn 2011/61/EU) (“AIFMD”). SSGA Funds Management, Inc. en State Street Global Advisors Trust Company zijn de beheerders van alternatieve beleggingsinstellingen (“BAB's”) van deze fondsen.
Alvorens u belegt, moet u de beleggingsdoelstellingen, risico's, vergoedingen en kosten van de fondsen in overweging nemen. Een prospectus met deze en andere informatie kunt u downloaden of aanvragen bij uw financieel adviseur. Lees het zorgvuldig alvorens te beleggen.
SPDR® Dow Jones® Industrial Average ETF staat genoteerd en is geregistreerd voor verkoop in Nederland.