Advisers seeking long-term growth for clients often look beyond the blue-chip large cap stocks to the more dynamic small and mid-cap (SMID) sector. While many portfolios include Australian SMIDs, you could be missing the forest for the trees.
The global SMID universe offers the same diversification and return-boosting potential, but its opportunity set is exponentially larger. However, global SMIDs remain a significantly under-allocated asset class.
Through careful stock selection and active management, an exposure to global SMIDs can substantially boost portfolio growth. Their potential is fuelled by rapid innovation, revenue growth and the ability to gain market share. Although the focus of the past two years has been on large-cap titans, notably the ‘mag 7’, it’s important to remember that today’s giants all started as disruptive small or mid-cap companies. The next Apple, Nvidia or Google is almost certainly a SMID today. And importantly, each of these mega caps is circled by a myriad of SMIDs providing integral products and services.
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