The Case for the US Mid Cap Space
Using history as a guide, investors have an opportunity to capture strong risk-adjusted returns with US mid cap stocks. US mid cap companies have market capitalizations ranging from US$2 billion to US$20 billion, and can offer a risk-return "sweet spot" between small fast-growing businesses and large, established companies.
Key benefits of US mid cap investments
- US mid caps provide the stability of large caps with the growth potential of small caps.
- Historically, US mid caps have provided favourable risk/return characteristics. This can counterbalance a conservatively-positioned portfolio without going too far out on the risk curve.
- Fewer Wall Street analysts cover mid caps than large caps. Less coverage is an opportunity for active managers to outperform.
- US mid cap stocks have greater takeover potential.
As shown by the chart below, over the last 20 years the Russell Mid Cap Index has outperformed both the Russell 2000 Index and S&P 500 Index, with lower standard deviation than the Russell Mid Cap Index.
Mackenzie US Mid Cap Growth Class: An "All Weather" Fund
- The Mackenzie Growth Team is focused on owning high quality, innovative, secular growth businesses that will perform well across market cycles.
- Portfolio positioning has become more defensive as we continue into the later stages of the market cycle. Over the last two years the portfolio has transitioned from higher to lower volatility stocks; investing in companies that are less sensitive to the economy. The companies operate in newer industries that have a long-term growth trajectory.
- The Fund's holdings can do well in a rising economy, but also perform reasonably well in a difficult economic environment, contributing to the "all-weather" nature of the portfolio. This has resulted in lower downside capture relative to the peer group over 3-, 5-, and 10-year periods.
|YTD||1 Yr||3 Yr||5 Yr||10 Yr||Since Inception*|
|Mackenzie US Mid Cap Growth Class – Series F||15.2%||22.0%||11.9%||16.4%||13.5%||11.7%|
|Russell 2500 Total Return Index**||11.7%||22.1%||11.1%||16.7%||13.6%||10.4%|
|Morningstar US Small/Mid Cap Equity Peer Group||7.8%||16.0%||8.2%||12.9%||10.7%||7.8%|
|Percentage of Peers Beaten||93||85||89||85||81||93|
Source: Morningstar Direct (3-, 5-, and 10-year returns are annualized returns), as of July 31, 2018. *Inception of Mackenzie US Mid Cap Growth Class – Series F was on January 9, 2003. **The Fund's benchmark was changed in March 2017 from the Russell Mid Cap TR Index to the Russell 2500 TR Index, in order to better reflect the holdings in the portfolio.