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

Volatility returned with a vengeance...virtually evaporating vaults of value investors had ventured against the VIX and vexing voyeurs not envisioning vicissitude. 

V stands for Victory for active small and mid cap equity managers. During periods of high volatility, small cap value managers have produced alpha of 1.4 versus periods of low volatility when they have produced alpha of -0.71. The low volatility environment of the past few years has been accompanied by strong asset flows to passive strategies. Indeed, a rising tide lifts all boats and since index strategies buy everything in the index indiscriminately, strong ETF flows create an environment that makes it more difficult for active managers to beat their benchmark. However, passive strategies can't have their cake and eat it too. When money flows out of ETFs, active managers win. So too, high quality stocks as measured by return on equity perform better by a monthly spread of 230 basis points1 when money flows out of ETFs, not in. Good portfolio managers don't need volatility to produce superior returns over time, but a little tailwind never hurts. 

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) -1.86 -1.86 17.23 8.37 12.09 8.78 11.99 1/1/00
Baird Small/Mid Cap Value (net) -2.20 -2.20 15.89 7.47 11.20 7.85 11.00 1/1/00
Russell 2500 Value Index -2.65 -2.65 5.72 7.26 9.88 9.35 10.04


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 3/31/18