Re-Thinking the Equity Equation: Take Another Look at Small Caps

The rebounding economic environment may help smaller and more nimble companies outperform their larger peers, but many investors remain under-allocated to the small-cap segment of the market.

In the upcoming webcast, Re-thinking the equity equation: Take another look at small caps, Todd Jablonski, Chief Investment Officer, Principal Global Asset Allocation; Jeffrey Schwarte, Portfolio Manager, Principal Global Equities; and Matthew Cohen, Head of ETF Specialist Team, Principal Global Investors, will outline compelling cyclical opportunities in the small-cap space.

For example, investors may consider a multi-factor approach to the group through the Principal’s U.S. Small-Cap Multi-Factor Index ETF (NASDAQ: PSC).

PSC tries to reflect the performance of the Nasdaq US Small Cap Select Leaders Index, which “uses a quantitative model designed to identify equity securities (including growth and value stock) of small-capitalization companies in the Nasdaq US Small Cap Index (the ‘parent index’) that exhibit potential for high degrees of sustainable shareholder yield, pricing power, and strong momentum while adjusting for liquidity and quality,” according to Principal.

The Principal’s U.S. Small-Cap Multi-Factor Index ETF is a strategic beta solution that seeks to deliver momentum, quality growth, and value. The ETF provides exposure to small-cap stocks designed to participate across market cycles.

The multi-factor, small-cap equity solution offers an active index design that exploits value, quality, and momentum factor anomalies in small-cap stocks for long-term growth. The rules-based framework helps diversify and reduce unintended risks. Additionally, the portfolio construction combines multiple factors with desirable characteristics to help avoid fundamentally distressed small-cap companies.

PSC can provide investors with innovative factor definitions, combinations, and portfolio construction aimed to increase returns and/or reduce risk. The active index design may make PSC an attractive complement or replacement to passive, cap-weighted strategies and fundamental, active strategies.

Financial advisors who are interested in learning more about the small-cap segment can register for the Wednesday, September 15 webcast here.

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