Many investors recognize that their reference universe should encompass large, mid and small caps, and furthermore accept the investment belief that smaller companies should earn a risk premium over larger ones. Nevertheless, in practice, most of these investors underweight the small cap segment. Institutional investors - particularly in Europe and Asia - tend to have limited small cap representation, even within their own markets.We review various aspects of this puzzle and argue that...

If you would like to gain a greater understanding of current practices and emerging trends in the implementation of global equity allocation policies, take a look at Global Equity Allocation, three of our most popular papers on this topic compiled into one easy-to-read publication.

As part of the MSCI Research series on global equity implementation, this paper reviews the active management opportunity in different market segments, and discusses the role of very active mandates across segments in a core-satellite portfolio structure. Our research based on manager performance data over the last 10 years indicates that there is little evidence that average emerging markets or small cap managers have produced higher or more persistent risk-adjusted returns relative to...

The recent financial crisis led many institutional investors to review their asset allocation policies and explore alternative approaches to implementation. MSCI recently held discussions around the world with major pension plans, asset managers, and investment consultants to understand different approaches to implementing equity allocation. Following these consultations, we provide a framework for the implementation of global equity allocation. Our research suggest that global equity...

Globalization has brought about a major rethinking of the equity investment. Thought leaders in the industry are questioning the merit of the existing equity allocation practices and are increasingly looking towards an integrated global equity investment process. The partitioned domestic/non-domestic approach to equity investing may have been built on the grounds of segmented economies, high levels of foreign investment restrictions, and heavily domestically-focused companies but its validity...