Mid-Cap Growth Investing

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The capitalization of the U.S. equity investment universe, as represented by the Russell 3000® Index, is approximately:

• 9% small-cap companies with capitalizations under $2 billion;
• 21% mid-cap companies with capitalizations between $2 billion and $10 billion;
• 70% large-cap companies with capitalizations above $10 billion.

Executive Summary

• Mid-cap equities have historically had superior risk-adjusted returns relative to other domestic equity asset classes
• While both growth and value mid-cap stocks offer attractive opportunities, we believe the case for mid-cap growth is particularly compelling
• Our research shows that the mid-cap equity universe has an abundance of mid-life cycle, financially sound, high growth companies, with the potential to sustain earnings growth over time
• Many investors do not treat mid-cap equities as a distinct asset class and therefore underutilize a high-potential area of the equity market
• Investors should consider style when choosing either active or passive management, as empirical evidence suggests that active management can add value within growth investing
• Within the mid-cap growth space, sufficient dispersion exists in the performance of active managers to suggest to us that good manager selection has the potential to enhance investor returns