Small/Mid Cap Core

Strategy Highlights

  • The Small/Mid Cap Core Strategy is benchmarked to the Russell 2500™ Index.
  • Special emphasis in the new idea generation process is placed on companies have transitioned from small to mid-cap, or have the characteristics that suggest the potential to grow from small to mid-cap in the long term.
  • The Portfolio Manager generally seeks companies that he believes can generate high or improving cash-flow returns on invested capital.
  • Portfolios generally demonstrate higher returns on invested capital compared to the Russell 2500™ benchmark, with favorable relative valuations.
  • Portfolios hold securities across the growth-to-value spectrum.
  • Portfolios are actively managed using a bottom-up investment approach.
  • Portfolios are typically fully invested, generally holding less than 5% cash.
  • Our approach seeks to manage risk through diversification, generally holding 80-120 securities with no single security exceeding 5% of the total portfolio

Objective

The objective of the Small/Mid Cap Core strategy is to consistently outperform the Russell 2500™ Index over a complete market cycle.  Portfolios are comprised of a combination of small and mid-cap growth and value stocks. The strategy seeks to identify the characteristics of businesses that enable companies to transition from small cap to mid cap.  This approach results in a portfolio that typically contains companies that are capable of generating higher returns on capital vs. the benchmark, with opportunities to invest in the business to compound value over time.

Click here to view the current Small/Mid Cap Core Commentary.

Small/Mid Cap Core | Annualized Returns as of 3/31/2024

† Not Annualized. Source: Advent APX.

Quarterly Fact Sheet

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Although the statements of fact and data in this report have been obtained from, and are based upon, sources that the Firm believes to be reliable, we do not guarantee their accuracy, and any such information may be incomplete or condensed.  All opinions included in this report constitute the Firm’s judgment as of the date of this report and are subject to change without notice.  This report is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security.  A complete list of all securities recommended by KCM in the preceding year, a fully compliant GIPS composite report, and the list of composite descriptions are available upon request from KCM at 10829 Olive Blvd., Suite 100. St. Louis, MO, 63141.

Kennedy Capital Management LLC (“KCM”) is a Delaware limited liability company headquartered in Missouri. KCM is registered as an investment adviser with the Securities and Exchange Commission under the Investment Advisers Act of 1940. Registration with the SEC does not imply any level of skill or training. Clients of the Firm include U.S. corporations, pension and profit sharing funds, colleges and universities, trusts, not-for-profit organizations, foundations, and individuals. KCM claims compliance with the Global Investment Performance Standards (GIPS®). GIPS® is a registered trademark of CFA Institute. CFA Institute does not endorse or promote this organization, nor does it warrant the accuracy or quality of the content contained herein. (GIPS®) are a set of standardized, industry-wide ethical principles that provide investment firms with guidance on calculating and reporting their investment results to prospective clients to ensure fair representation and full disclosure of an investment firm’s performance history.

Small/Mid Cap Core Composite is invested in securities of value and growth companies that have a market capitalization ranging from small cap to midcap, generally reflective of the Russell 2500™ Index. We generally look for value companies that trade at an attractive relative valuation on a price-to-earnings and price-to-cash flow basis, and growth companies that have opportunities to grow assets at returns above the cost of capital. The U.S. Dollar is the currency used to express performance.

Composite specific data provided within this presentation has been calculated from accounts that are discretionary as defined in this paragraph. The assets shown are derived only from discretionary accounts. Non-discretionary accounts, as defined by KCM, are accounts that are not included in the composite due to one or any combination of the following criteria: there were significant cash inflows or outflows within the account; the account’s asset level did not meet the minimum requirement to remain in the composite; the account assets are managed by others using our non-discretionary model. The temporary removal of such an account occurs at the beginning of the month and the account re-enters the composite the month after the criteria has been met.

Returns are presented gross and net of investment advisory fees and include the reinvestment of all income.  Gross of fee returns reflect the deduction of transaction costs and custodian fees but do not reflect the deduction of investment advisory fees.  Net of fee performance is calculated using gross returns less the actual applicable annual management fee applied monthly.  Past performance is not indicative of future results. A client’s return will be reduced by the advisory fees as described in Form ADV Part 2A and other expenses incurred by the account.  For example, an annual advisory fee of 1% compounded quarterly over 10 years will reduce a gross 14.44% annual return to a net 13.32% annual return.  Form ADV Part 2A is available upon request. 

The performance figures reported herein are unaudited, may be based upon information obtained via electronic data sources (“feeds”) and may be subject to change.  Data feeds from many of KCM clients’ selected custodians are obtained through third party sources and are used to compare custodial data to KCM’s client account records as frequently as daily.  Monthly, KCM reviews clients’ account holdings along with cash and share quantities against the custodial statements.  In some instances, variances may exist between final audited custodial information and the information KCM obtains via such data feeds.  Generally, any such variances are researched and reconciled within thirty days of the period end.

Russell Investment Group is the source and owner of the Russell Index data contained or reflected in this material and all trademarks and copyrights related thereto.  The presentation may contain confidential information and unauthorized use, disclosure, copying, dissemination or redistribution is strictly prohibited.  This is a presentation of Kennedy Capital Management.  Russell Investment Group is not responsible for the formatting or configuration of this material or for any inaccuracy in Kennedy Capital Management’s presentation thereof.   

The Russell 2500™ Index measures the performance of the small to mid-cap segment of the U.S. equity universe, commonly referred to as “smid” cap. The Russell 2500™ Index is a subset of the Russell 3000® Index. It includes approximately 2500 of the smallest securities based on a combination of their market cap and current index membership. The Russell 2500™ Index is constructed to provide a comprehensive and unbiased barometer for the small to mid-cap segment. The Index is completely reconstituted annually to ensure larger stocks do not distort the performance and characteristics of the true small to mid-cap opportunity set.

The Russell 2500™ Index are used as the benchmark.  The Indexes are unmanaged and represents total returns including reinvestment of dividends.  The benchmarks are used for comparative purposes only and generally reflects the comparable risk or investment style of the Firm’s strategy.  The investment portfolios underlying the Indexes are different from the investments in the portfolios managed by the Firm.  Certain accounts may also use other benchmarks not listed in the GIPS composite report.  The Verification and Performance Examination Report does not cover the benchmark returns included in the GIPS composite report.  Investors cannot invest directly in an Index.

Christian McDonald, CFA®

Portfolio Manager

CHRISTIAN MCDONALD, CFA®, Portfolio Manager for the Micro Cap, ESG SMID Cap, and Small/Mid Cap Core strategies. Mr. McDonald joined KCM in November 2005 as a Research Analyst. Prior to joining KCM, Chris spent six years in various finance functions at The Boeing Company.  Mr. McDonald graduated summa cum laude with a B.S. in Finance and Operations Management from Washington University in St. Louis and earned an M.B.A. from the UCLA Anderson School of Business. Chris is a Fundamentals of Sustainability Accounting (FSA) Credential Holder.