Key Takeaways
- • Don Steinbrugge, founder and CEO of Agecroft Partners, argues that global small-cap equities are among the most persistently overlooked segments of public markets and present an unusually attractive entry point for allocators.
- • Small caps are trading at one of the widest valuation gaps relative to large caps seen in recent decades, according to the author's assessment.
- • Small caps have historically delivered durable excess returns, outperforming large caps by roughly three to four times on a cumulative basis since 1927, though the relative performance has moved in extended cycles since 1980.
- • The global small-cap universe is structurally under-researched, and inefficiencies in how global research coverage is organized create mispricing opportunities for patient, well-resourced investors.
Summary
Global small-cap equities remain one of the most persistently overlooked areas of the public markets, according to Don Steinbrugge, founder and CEO of Agecroft Partners, a global hedge fund consulting and marketing firm. In an opinion piece published by Alternative Market Briefing under the "Other Voices" series, Steinbrugge argues that the current environment offers an unusually compelling entry point for allocators willing to look beyond the mega-cap names that dominate most portfolios.
His case rests on three reinforcing arguments. First, small caps are trading at one of the widest valuation discounts relative to large caps seen in recent decades. Second, the size of the global small-cap universe makes it structurally under-researched. Third, that thin coverage is compounded by inefficiencies built into how research is organized globally. Together, Steinbrugge contends, these forces allow patient, well-resourced investors to identify significant mispricings, an opportunity he describes as increasingly rare in large-cap markets.
Steinbrugge points to a long-run performance record as support. Going back to 1927, smaller companies have outperformed large caps by roughly three to four times on a cumulative basis, a pattern that he says has held across multiple market regimes, currencies, and economic cycles. He notes, however, that the small-cap edge has never moved in a straight line. Since 1980, the relationship between small-cap and large-cap returns has passed through a series of extended cycles in which one segment built a commanding lead over the other.
The article's full argument, including its detailed valuation analysis and discussion of research coverage gaps, is available through the publication's full-article link. The piece is an opinion contribution and its views are those of the author.
His case rests on three reinforcing arguments. First, small caps are trading at one of the widest valuation discounts relative to large caps seen in recent decades. Second, the size of the global small-cap universe makes it structurally under-researched. Third, that thin coverage is compounded by inefficiencies built into how research is organized globally. Together, Steinbrugge contends, these forces allow patient, well-resourced investors to identify significant mispricings, an opportunity he describes as increasingly rare in large-cap markets.
Steinbrugge points to a long-run performance record as support. Going back to 1927, smaller companies have outperformed large caps by roughly three to four times on a cumulative basis, a pattern that he says has held across multiple market regimes, currencies, and economic cycles. He notes, however, that the small-cap edge has never moved in a straight line. Since 1980, the relationship between small-cap and large-cap returns has passed through a series of extended cycles in which one segment built a commanding lead over the other.
The article's full argument, including its detailed valuation analysis and discussion of research coverage gaps, is available through the publication's full-article link. The piece is an opinion contribution and its views are those of the author.
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