Small cap premium debate heats up
The small cap premium continues to generate discussion among investors and academics despite claims of its disappearance. Research suggests the premium persists when investors eliminate lower quality stocks from consideration. Daedalus Income allocates nearly 34% of its portfolio to systematic active small cap funds, reflecting confidence in this strategy. The key distinction lies in filtering out underperforming or problematic securities that skew historical returns downward. By focusing on quality small cap investments, portfolio managers can capture meaningful outperformance that broader indices may miss. This approach challenges the narrative that small cap investing no longer offers advantages. The premium's existence depends heavily on implementation methodology and stock selection discipline.
