Small-Cap Funds Outperform Their Large-Cap Peers

Performance within the investment landscape - which has been dominated by large-cap funds for quite some time - appears to be experiencing a shift. 

To date, large cap indexes exhibiting strong exposure to the tech sector have delivered superior performance in 2023, whereas small cap indexes with high exposure to the banking sector, especially in the U.S. with the small regional banks, have underperformed following the collapse of SVB. 

Yet, small-cap stocks have now outperformed their larger counterparts for the second week in a row, with data showing the Russell 2000 gained +1.51% week-over-week (11.30% year-to-date), while the S&P 500 was up 0.69% (+18.15% year-to-date).

And a review of aggregated metrics conveyed similar findings. The small cap market segment, composed of 146 funds, achieved performance of +2.20% over the past week, while also generating robust capital flows totaling around $581 million, with nearly $10 billion since the start of year. It’s fair to say that small-cap stocks are successfully compensating for their early year performance lag.

Drilling down further into specific fund-level data reinforces this trend. Both iShares Core S&P Small-Cap ETF and Vanguard Small-Cap Value ETF reported strong performance of +2.53% and +2.72% for the week respectively, alongside capital inflows of $217 million and $86 million.