International Small Caps: How does fund size and style impact performance?

Recently on our podcast series, Standard & Poor's Alka Banerjee, VP of Global Equities, spoke with FactSet about recent research and conclusions drawn from the ways that international small cap funds have performed both over time and as a function of fund management style.

S&P is also presenting at FactSet's U.S. Symposium in March 2011. Read more about their presentation, or check out the S&P research paper on the same topic.

Highlights from this video podcast episode (above):

• S&P's research shows that risk is indeed higher in the international small cap space, but that the returns are high enough to justify allocations
• In addition to robust returns, the research shows that when the market is more volatile, as it has been in recent years, there is a higher rate of opportunity in the small cap space
• For the international small caps, not only are there more stocks that vary in performance over any period of time, but opportunities to Alpha pickers are much more than they are for large caps.
• Asset-weighted and equal-weighted funds do perform differently; in turn, the size of a fund definitely has an impact on returns, but it's not necessarily a debilitating impact
• On average only 22% of managers who performed in the top quartile in a given three year period, continued to outperform at the same level over time, representing the difficulty of maintaining performance success in the international small cap markets

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