Story perspectives

Global Small-Cap Stocks: Safer Bet with Higher Returns

10/24/2025

Summary

Story summary

Global small-cap stocks, according to Royce Investment Partners, offer a choice with historically higher returns and lower volatility than large caps and emerging markets.
The study finds global small caps produced no negative returns over ten-year periods, while large caps faced losses 17% of the time.
It concludes the favorable risk/reward profile makes global small caps a compelling choice for investors seeking to improve portfolio performance without substantially increasing risk.

History

Historical Context

In 1986, a pivotal study by Brinson, Hood, and Beebower revealed that asset allocation significantly influences portfolio performance, with a 93.6% correlation between indexed returns and actual returns. This finding shifted investor focus towards strategic asset allocation, leading to increased interest in small-cap stocks, which, as noted in a 2013 study, historically yield higher returns with lower volatility compared to large-cap stocks.

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Story summary

Global small-cap stocks, according to Royce Investment Partners, offer a choice with historically higher returns and lower volatility than large caps and emerging markets.
The study finds global small caps produced no negative returns over ten-year periods, while large caps faced losses 17% of the time.
It concludes the favorable risk/reward profile makes global small caps a compelling choice for investors seeking to improve portfolio performance without substantially increasing risk.

1 / 2