For the first three quarters of 2013, U.S. equity markets, measured by the S&P 500, have performed strongly, leading broad developed and emerging indexes with a return of nearly 20%. Impressive, yes, but if one looks further down the capitalization spectrum in the U.S. markets and across global markets, there have been even better returns in global small caps during this cyclical upturn.

Typically, small-cap companies have higher growth rates and potential, are more cyclically sensitive and tend to lead large caps in performance during economic expansions. Although global economic growth is below trend, the economy has emerged from the great recession, and leading indicators are pointing to a rebound in many of the major developed markets—the United States, Europe and Japan. This optimism is evident in the recent performance of equity markets year-to-date.

Small-Cap Performance Evaluation

In the below we will compare a cross section of WisdomTree’s small-capitalization Indexes across the global landscape with common large-cap indexes to highlight the differences in the global small-cap opportunity set.

• We will use the S&P 500, MSCI EAFE and MSCI Emerging Markets indexes to represent domestic, developed international and emerging market large-cap equities, respectively.

• Also, we will use the Russell 2000 Index to represent a broad measure of U.S. small-cap equities.

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