Active investing in the small-cap space

McKee: We believe that active management in small caps is still attractive for a few reasons. The first is that small-cap companies are still relatively underfollowed by Wall Street analysts. The average small-cap company only has four to six analysts following it while a large-cap company has about 20. The second is liquidity; small caps tend to have much lower liquidity in the market than large caps and low volume of stocks can have significant impact on price movements and sometimes the price movements are not representative of fundamentals and these pricing inefficiencies allow active managers the opportunity to capitalize on them. And lastly, the small-cap market is much larger in size than the large-cap [market]. There are over 2000 names in the small-cap versus about 200 in the large-cap. There’s much greater opportunity for alpha to be generated through stock selection versus sector allocation bets.


The views expressed in this video, recorded in 2014, represent the Manager's assessment of the market environment as of July 2014 and continue to represent the Manager’s views in March 2017. These views should not be considered a recommendation to buy, hold, or sell any security, and should not be relied on as research or investment advice. Views are subject to change without notice and may not reflect the Manager's views.

Market segmentation source: Russell Investments, 2014

Carefully consider the Funds' investment objectives, risk factors, charges, and expenses before investing. This and other information can be found in the Funds' prospectuses and their summary prospectuses, which may be obtained by visiting the fund literature page or calling 800 523-1918. Investors should read the prospectus and the summary prospectus carefully before investing.

IMPORTANT RISK CONSIDERATIONS

Investing involves risk, including the possible loss of principal.

Past performance does not guarantee future results.

Narrowly focused investments may exhibit higher volatility than investments in multiple industry sectors.

REIT investments are subject to many of the risks associated with direct real estate ownership, including changes in economic conditions, credit risk, and interest rate fluctuations.

Investments in small and/or medium-sized companies typically exhibit greater risk and higher volatility than larger, more established companies.

Alpha measures the portion of an investment’s total return that is independent of general market movements. In the case of mutual funds, alpha typically describes the portion of returns that is attributable to the investment’s inherent value, apart from the portion of returns that can be attributed to broader market fluctuations.

©2017 Delaware Management Holdings, Inc.

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Carefully consider the Funds' investment objectives, risk factors, charges, and expenses before investing. This and other information can be found in the Funds' prospectuses and their summary prospectuses, which may be obtained by visiting delawarefunds.com/literature or calling 800 523-1918. Investors should read the prospectus and the summary prospectus carefully before investing.

IMPORTANT RISK CONSIDERATIONS

Investing involves risk, including the possible loss of principal.

Past performance does not guarantee future results.

Narrowly focused investments may exhibit higher volatility than investments in multiple industry sectors.

REIT investments are subject to many of the risks associated with direct real estate ownership, including changes in economic conditions, credit risk, and interest rate fluctuations.

Investments in small and/or medium-sized companies typically exhibit greater risk and higher volatility than larger, more established companies.

Alpha measures the portion of an investment’s total return that is independent of general market movements. In the case of mutual funds, alpha typically describes the portion of returns that is attributable to the investment’s inherent value, apart from the portion of returns that can be attributed to broader market fluctuations.

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