European Small Caps Separate from the Pack

While we recognize that past performance is no indicator of future results, we believe that when a fund ranks number one in a particular investment category on a total return basis over the past one year period, it deserves special mention. This is particularly true when the fund category is becoming the prime focus for asset flows and many people want to increase their exposure to that investment theme.

The WisdomTree Europe SmallCap Dividend Fund (DFE) was ranked the number one fund out of 113 Europe-focused open-ended (OE) mutual funds and exchange-traded funds (ETFs) in 2013.1 DFE is alone at the top—not just because of its performance, but also because it is the only exchange-traded fund (ETF) within this particular category that focuses purely on small-cap equities.2 Furthermore, there are only three mutual funds dedicated to European small caps, and the largest of them closed to new investors in December 2013, as we discussed in this prior blog post.

Digging into the Results

DFE’s strong performance in 2013 was not a one-off. As we look back to its long-term performance, DFE has a compelling track record that includes its ranking as the number two fund out of 104 funds in the three-year ranking, and the fifth-ranked fund of 89 funds with a five-year history on a total return basis, beating at least 95% of its peer group over each of those periods.

DFE versus the Morningstar Europe Stock Peer Group (7/1/2006 — 12/31/2013)

DFE Average Annual Returns, as of 12/31/2013

Background on DFE

DFE is designed to track the returns of the WisdomTree Europe SmallCap Dividend Index after costs, fees and expenses. European small caps are not just in focus because of their great performance run discussed above. When investors consider positioning for a European recovery, we believe that small caps are one of the best choices, because: