Domestic mid-cap stocks are often glossed over by investors. Knowing that is the case, the trend of ignoring mid-caps is even more prevalent with global stocks.

Ignored does not mean lacking upside potential. Take the example of the SPDR S&P International Mid Cap ETF (NYSEArca: MDD). MDD is up 6.5% over the past 90 days, a performance that is about 250 basis points better than the iShares Core S&P Mid-Cap ETF (NYSEArca: IJH), but no one is talking about MDD. [Don’t Forget This Mid-Cap ETF]

The ETF’s lack of notoriety is not stopping some money managers for embracing the fund, although MDD has its drawbacks.

“I think investors are probably turned off by the fund size and the relative difficulty trading it. There is not a lot of retail volume on a daily basis and the fund tends to trade at a wide bid/ask spread,” said Stephen Murray, portfolio manager at New Hampshire-based Harvest Capital Management, in an interview with ETF Trends.”So investors need to take a long term view and put the added costs of trading the fund in the context of this being a core international position. My firm (Harvest Capital Management) wants to structurally overweight mid cap stocks globally in our portfolios so we are willing to pay more going into the trade knowing we planning for a potentially multi-year holding period.”

MDD has $71.7 million in assets under management, but investors should not be fooled by the ETF’s diminutive stature if for no other reason than that small ETFs have a tradition of generating returns that make investors question why those funds are not larger. [Big Gains With Small ETFs]

MDD has more than the tradition of other small ETFs on its side.

“I think investors almost don’t know what to do with the middle of the market. I think that can create opportunities for investors who seek out exposure to mid caps. If you look historically, , International Mid Cap indices have returns very similar to international small cap indices and much higher than large cap indices,” said Murray.

MDD offers exposure to 28 countries with Japan and the U.K. combining for 43.3% of the fund’s weight. Including the U.K., 17 of MDD’s country weights are European nations, including 12 Eurozone members, which gives the fund ample exposure to recovering economies across the Atlantic.

“We still like Europe equities as the valuations are relatively better than the US. This is especially true if you believe that Europe is in the early stages of domestic recovery and Central Bank liquidity injections vs. the US which is closer to peak earnings, margins and declining Fed liquidity. Mid cap stocks in general should be more geared to domestic recovery than the large global multinational European large caps,” added Murray.

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