There are two common myths when it comes to investing in global small- and mid-caps – that they have lower risk-adjusted returns and shouldn’t be a strategic asset allocation in portfolios and that they should be held in concentrated portfolios. But the low broker coverage and lack of research on SMID caps mean greater opportunity to exploit market mispricing relative to large caps.

To fully benefit from the opportunity gaps in global SMID caps, practitioners must understand the industries in which companies operate, including the winners and losers, how value ...