The Power of Mid-Caps

We believe mid caps offer untapped potential and that investors may be surprised to learn that mid-cap stocks have outperformed both small- and large-cap stocks, and have done so with lower volatility.

September 2019

  • Neil J. Hennessy
    Neil J. Hennessy
    Chief Investment Officer and Portfolio Manager
  • Ryan C. Kelley
    Ryan C. Kelley, CFA
    Portfolio Manager

We believe U.S. mid-cap companies offer untapped potential for investors. However, with many small- and large-cap funds extending their reach to the mid-cap space, some investors may assume they have covered all asset classes with an allocation to only small- and large-cap stocks, perhaps neglecting mid-caps altogether. Investors could be missing out on the power of a mid-cap allocation. Here’s why:

Mid Caps Dominate in Long-Term Performance

Over the 15-year period ended 9/30/19, a $10,000 investment in mid-caps has returned 21% more than small-caps and 10% more than large-caps. In fact, over the past 15 years ended 9/30/19, mid-cap stocks have outperformed both small- and large-cap stocks.

 

Lower Volatility and Historically Better Risk-Adjusted Performance for the Long-Term

Not only have mid-cap stocks generated higher absolute returns over a longer time frame, mid-caps have also provided these superior returns with less associated risk. Over the 15-year period ended 9/30/19, investors in mid-caps have experienced higher return and lower risk relative to investors in small-caps. In addition, while mid-caps had more risk than large-caps, investors have been rewarded with a higher return over the same period.