Investing Ideas

Closing the global small cap portfolio gap

How allocations to small cap global stocks can improve diversification, resilience, and long‑term return potential in an evolving market.

By: Shah Badkoubei

Updated: 6/23/2026

Key Takeaways

Many global equity portfolios remain unintentionally concentrated in large companies, leaving a meaningful portion of the opportunity set underrepresented.
Global small caps provide diversification that is both economic and behavioral, with returns driven more by local fundamentals as opposed to global macro positioning.
The opportunity set is broader and less efficient, with double the stocks versus the MSCI ACWI, less analyst coverage, and quantitative metrics that point to opportunities for active security selection.
Excluding global small caps may increase concentration risk in an investment environment led by a narrow set of mega cap stocks and themes.
Since the ’90s, global small caps generated a better return than global large caps.

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Closing the global small cap portfolio gap

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