Is the Tide Turning for High-Quality Small Caps?

The evidence behind today’s opportunity for quality-oriented active investing

The past fifteen months have been among the most challenging environments for high-quality small cap investing in the past four decades. Market leadership has been dominated by a narrow group of speculative, highbeta* companies, creating conditions rarely observed in modern market history. While no one can predict exactly when leadership will change, history suggests these extreme periods have not persisted indefinitely. For institutional investors, the question is not whether history will repeat exactly. It’s whether today’s market conditions warrant re-evaluating an asset class and investment style that many have reduced or overlooked following an unusually difficult period — and this stretch has made that question hard to ignore.