Small/Mid Cap Value Strategy

OVERVIEW

Baird Equity Asset Management’s Small/Mid Cap Value portfolio invests in small- to medium-cap U.S. companies and seeks to provide superior risk-adjusted returns and consistently outperform the benchmark Russell 2500 Value Index over a full market cycle (typically 3–5 years). The portfolio comprises companies we expect to exceed street expectations and that trade at discounts to our proprietary calculations of fair value. To help control risks, the portfolio is generally diversified among companies in a broad range of industries and economic sectors.

Portfolio Construction

  • A concentrated portfolio of generally 40–50 stocks
  • A market cap range typically from $300 million to $10 billion at purchase 
  • Top holdings generally limited to 5% at cost, 8% at market
  • Sectors capped at 30% excluding financials 
  • Buy-and-hold approach
TEAM

For more information, contact Rob Zwiebel or the Intermediary Specialist in your region.

COMMENTARY

Q1 2018 Small/Mid Value and Small Value Commentary

The second quarter of 2018 produced more rewarding absolute results than the first quarter, yet relative returns vexed active managers.  Only 12% of small cap value managers and 16% of SMID value managers outperformed their benchmark for the period.  Small Cap ETF flows were off the charts and this drove outsized returns for the low end of the under-owned market cap range where liquidity is scarce.   Across all market cap segments, any kind of valuation discipline hurt relative performance.  Uncharacteristically, companies that beat earnings in the first quarter were generally not rewarded, trailing historical post earnings surprise returns by over 300 basis points.  Most of the underperformance occurred early in the quarter, however, and June saw a rotation back towards quality and value. The same held true for the Baird Small/Mid and Small Value Portfolios which underperformed in April, but posted better returns the remainder of the quarter.

Read Full Small or Small/Mid Value Commentary

PERFORMANCE

Annualized Returns (%)

 3 MonthsYTD1-Year3-Year5-Year10-YearSince InceptionInception Date
Baird Small/Mid Cap Value (gross) 2.55 0.49 16.45 8.40 12.19 7.85 11.98 1/1/00
Baird Small/Mid Cap Value (net) 2.35 0.09 15.25 7.42 11.27 6.92 10.97 1/1/00
Russell 2500 Value Index 5.80 3.00 11.49 9.76 10.78 10.10 10.23


Annual Total Returns (%)

20172016201520142013201220112010200920082007
Baird Small/Mid Cap Value (gross) 22.89 9.90 0.17 9.47 36.88 17.30 6.15 10.29 29.40 -38.74 24.22
Russell 2500 Value Index 10.36 25.20 -5.49 7.11 33.32 19.21 -3.36 24.82 27.68 -31.99 -7.27

*Data as of 6/30/18