International small cap: An overlooked opportunity

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By Robert Dwinall | 01 May 2010

Over the past several decades, the equity allocation of investor portfolios has evolved from containing solely U.S. large cap stocks to the addition of dedicated investments in U.S. medium and small cap stocks, international large and medium cap stocks, and emerging markets stocks. The advantage of investing in these segments of the equity markets is the potential for higher returns while reducing volatility and adding diversification. Throughout the evolution of equity portfolios, one segment remains largely overlooked in most investor portfolios: international small cap stocks. Like their U.S. counterparts, international small cap stocks offer the same benefits: the potential for enhanced performance, an expanded opportunity set, and increased diversification.