Small Cap Value Strategy


Baird Equity Asset Management’s Small Cap Value portfolio invests in domestic small-cap companies and seeks to provide superior risk-adjusted returns and consistently outperform the benchmark Russell 2000 Value Index over a full market cycle (typically 3–5 years). The portfolio comprises companies we expect to exceed street expectations and that trade at discounts to our proprietary calculations of fair value. To help control risks, the portfolio is generally diversified among companies in a broad range of industries and economic sectors.

Portfolio Construction

  • A concentrated portfolio of generally 40–50 stocks
  • A market cap range typically from $100 million to $2.5 billion at purchase 
  • Top holdings generally limited to 5% at cost, 8% at market
  • Sectors capped at 30% excluding financials 
  • A buy-and-hold approach

For more information, contact Rob Zwiebel or the Intermediary Specialist in your region.


Q4 2016 Small/Mid Value and Small Value Commentary

As a Midwesterner, I grew up on the popular German card game, euchre. For those not familiar with the game, the object is to win at least three of the five rounds or tricks played. Advantage typically goes to the player who holds the highest cards of the suit named trump (which can win a trick where a card of a different suit has been led). How is this relevant to our performance in the second half of 2016? In short, we didn’t hold enough Trump cards.

Although during the past couple years we have witnessed the market rotate for short-time periods to “risk on” or “low quality”, those gains have quickly reversed as hopes for economic/earnings reacceleration did not materialize. Market leadership instead, had been dominated by companies offering earnings growth, stability and attractive capital structures.

The surprise Trump victory coupled with a Republican-controlled Congress derailed that trend. Post-election, the Russell 2000 Value rallied 17.4%, the best November in the history of the benchmark and the largest margin of victory for small caps over large caps, with the S&P 500 up 5.0% over the same period. Like many managers, we were caught by surprise in terms of both the election and the market’s bullish reaction. In fact, only 10% of small cap value managers were able to best the benchmark in 2016.

Read Full Small or Small/Mid Value Commentary