Global Small Caps Leading the Way: Comparing Regional Opportunities

Transcription

1 Research MARKET INSIGHTS [ October 2013 ] Global s Leading the Way: Comparing Regional Opportunities BY JEREMY SCHWARTZ, CFA, DIRECTOR OF RESEARCH & TRIPP ZIMMERMAN, CFA, RESEARCH ANALYST For the first three quarters of 2013, U.S. equity markets, measured by the S&P 500, have performed strongly, leading broad developed and emerging indexes with a return of nearly 20%. Impressive, yes, but if one looks further down the capitalization 1 spectrum in the U.S. markets and across global markets, there have been even better returns in global small caps during this cyclical upturn. In this market insight, we highlight the recent performance of the small-capitalization market around the globe and discuss important considerations for further allocations from today s levels. Adding exposure to small caps can offer increased diversification and return potential, but there are critical differences in investment strategies. In our opinion, a rules-based approach that focuses and rebalances based on underlying fundamentals 2 may enable investors to better capitalize on the small-cap segment, especially given the large performance run small caps have experienced recently. SMALL-CAP PERFORMANCE EVALUATION Typically, small-cap companies have higher growth rates and potential, are more cyclically sensitive and tend to lead large caps in performance during economic expansions. Although global economic growth is below trend, the economy has emerged from the great recession, and leading indicators are pointing to a rebound in many of the major developed markets the United States, Europe and Japan. This optimism is evident in the recent performance of equity markets year-to-date. Throughout this piece we will compare a cross section of s small-capitalization Indexes across the global landscape with their respective size capitalization benchmarks and common large-cap indexes to highlight the differences in the global small-cap opportunity set. + We will use the S&P 500, EAFE and Market indexes to represent domestic, developed international and emerging market large-cap equities, respectively. + Also, we will use the Russell 2000 Index to represent a broad measure of U.S. small-cap equities. 1 Size capitalization: A measure by which a company s size is classified. Large caps are usually classified as companies that have a market cap over $10 billion. Midcaps range from $2 billion to $10 billion. Small caps are typically new or relatively young companies and have a market cap between $200 million to $2 billion. 2 Fundamentals: Attributes related to a company s actual operations and production as opposed to changes in share price.

2 Research MARKET INSIGHTS [ October 2013 ] These indexes were chosen because of their scope in their respective asset classes and their general popularity for tracking and measuring these segments. FIGURE 1: YEAR-TO-DATE INDEX PERFORMANCE Total Return 35% 30% 25% 20% 15% 10% 5% 31.13% 29.24% Small-Cap Indexes 27.69% Large-Cap Indexes 24.64% 21.46% 21.24% 19.79% 16.14% 0% -5% -10% Earnings Europe Russell 2000 Japan Indexes International S&P 500 EAFE -0.30% Markets -4.35% Markets Sources: Bloomberg, (12/31/12 09/30/13). Past performance is not indicative of future results. You cannot invest directly in an index. Subject to change. + s Outperformed Large Caps: All but one of the small-cap indexes above outperformed domestic, international and emerging market large-cap indexes mentioned. The chart illustrates the importance of looking beyond the large-cap market. The Russell 2000 Index, a market barometer for small caps, outperformed the S&P 500, EAFE and EM indexes by 7.90%, 11.55% and 32.04%, respectively. + Earnings Index: This was the best performer over the reviewed period, outperforming the Russell 2000 Index by 3.44%. The Earnings Index includes only companies that demonstrate a prior four quarters of cumulative positive earnings and then weights those companies based on their relative earnings. On the other hand, the Russell 2000 Index is weighted by market capitalization and may include companies that are not profitable. After such strong performance in small-cap stocks, we believe a focus on a disciplined rebalancing process gains significant importance. + International Small-Cap Strategies Also Leading Large Caps: Both in the developed international and the emerging markets, small-cap indexes are outperforming their large-cap peers, as demonstrated by the International Index leading the EAFE by over 5 percentage points and the Markets Index leading the Markets Index by over 4 percentage points. + Looking Abroad to Diversify s: Many investors incorporate small-cap strategies for the United States as part of their portfolio but have yet to expand these allocations internationally. The relatively strong returns in the United States may indicate a useful time to diversify some of the U.S. small caps to some of the foreign small-cap indexes, such as the emerging markets, that have not experienced such large gains. 2

3 Research MARKET INSIGHTS [ October 2013 ] SMALL CAPS FOR INCOME In today s low-interest-rate environment, dividend 3 -paying equities have become an attractive alternative source of income not only because of the current income they provide but also because of their potential for growth. When investors think of dividends, they tend to think of mature large-cap companies as the primary source. As a result, we feel that many investors mistakenly overlook smallcap equities as attractive income options. FIGURE 2: TRAILING 12-MONTH DIVIDEND YIELD 4 [ As of 9/30/2013 ] Trailing 12-Month Yield 6% 5% 4% 3% 2% 1% 4.85% 4.03% 3.91% 3.84% 3.20% 2.73% 2.14% 2.09% Small-Cap Indexes Large-Cap Indexes 1.68% 1.62% 0% Markets Europe International EAFE Indexes Markets Japan S&P 500 Earnings Russell 2000 Sources: Bloomberg,. Past performance is not indicative of future results. You cannot invest directly in an index. Subject to change. + International Indexes Typically Have Higher Yields: Whether looking at the large-cap or the small-cap indexes above, we typically see higher trailing dividend yields outside the United States. The Russell 2000 Index had the lowest dividend yield of the indexes examined and the Markets Index had the highest, a full 3 percentage points higher than U.S. small caps. + Indexes Exhibited Higher Yields: s dividend Indexes are rebalanced annually to include only dividend-paying companies, and then the indexes are weighted by their respective Streams. While potentially not as broadly focused as market capitalization-weighted indexes, when combined, this approach tends to produce higher trailing 12-month dividend yields. A disciplined annual rebalancing process back to the underlying fundamentals is important, especially given the tendency for valuations in the small-cap space to become stretched. 3 : A portion of corporate profits paid out to shareholders. 4 yield: A financial ratio that shows how much a company pays out in dividends each year relative to its share price. 3

4 Research MARKET INSIGHTS [ October 2013 ] SMALL-CAP DIVIDEND GROWTH There is no question that investors are drawn to the idea of dividend growth 5 potentially even more today, given the recent rise in U.S. interest rates and expectations that interest rates will eventually normalize to higher levels. Although a valid concern, historically, U.S. dividends have grown faster than the Consumer Price Index, a common measure of inflation, by over a full percent. 6 While we believe that valuations matter first, there is an important fundamental link between dividend growth and total return. Over the last 10 years, small-cap indexes have delivered higher dividend growth than their large-cap peers both in the United States and globally. FIGURE 3: 10-YEAR DIVIDEND GROWTH Average Annual Growth 16% 14% 12% 10% 8% 6% 4% 2% 14.92% 10.84% 9.70% 8.82% 8.11% Small-Cap Indexes Large-Cap Indexes 7.58% 0% EM ACWI EAFE Indexes Russell 2000 ACWI S&P 500 Sources: Bloomberg,,. Past performance is not indicative of future results. You cannot invest directly in an index. Subject to change. + s Led Growth: Over the past 10 years, in regards to the dividend growth, all the small-cap indexes displayed above were able to outperform the large-cap indexes mentioned. Over the past 10 years, the ACWI Index exhibited over 2.7% higher average annual dividend growth than the ACWI Index. Also, the Russell 2000 Index was able to grow its dividends faster than the S&P 500 Index by over 1.2% on an average annual basis. + Market s Led: The EM Index grew dividends the fastest of all the indexes displayed above. There are risk differences across regions, and emerging markets have higher risks, but we found it impressive that the EM Index displayed over 6% higher dividend growth than the Russell 2000 Index. CURRENT SECTOR POSITIONING OF SMALL CAPS One of the important reasons to consider small-cap strategies is their diversification potential from traditional large-cap index strategies. One practical measure of this diversification is the difference in sector composition of small-cap and large cap indexes and there is an additional diversification benefit that one can get from examining small caps around the globe compared to U.S.-centric small caps. 5 growth: The growth in trailing 12-month dividends for the specified universe. 6 Source: Bob Shiller, ( ). 4

5 Research MARKET INSIGHTS [ October 2013 ] FIGURE 4: SECTOR DIFFERENCES [ As of 9/30/2013 ] Sectors S&P 500 Consumer Discretionary Consumer Staples Domestic Indexes Developed International Indexes Markets Russell 2000 WT WT Earnings EAFE EAFE WT Int'l Europe WT Europe Japan WT Japan Markets EM WT EM 12.5% 13.9% 13.2% 19.0% 11.8% 19.2% 20.9% 19.7% 15.3% 19.3% 23.3% 9.0% 17.1% 14.8% 10.0% 4.0% 5.7% 4.3% 11.3% 5.6% 7.1% 4.8% 6.6% 9.1% 10.7% 8.9% 7.9% 6.7% Energy 10.5% 5.6% 1.8% 5.0% 6.9% 4.1% 1.9% 5.1% 2.3% 0.5% 1.1% 11.2% 2.4% 2.5% Financials 16.3% 22.3% 24.3% 23.6% 25.4% 19.6% 16.3% 19.4% 15.8% 18.6% 12.5% 27.2% 17.2% 22.0% Health Care 13.0% 13.0% 4.7% 6.4% 10.0% 6.3% 3.3% 6.1% 5.3% 5.5% 4.3% 1.5% 5.4% 2.4% Industrials 10.7% 14.5% 19.6% 17.7% 13.0% 22.6% 25.7% 22.6% 25.8% 23.5% 25.6% 6.3% 16.2% 16.3% Information Technology 17.9% 18.1% 10.6% 15.4% 4.3% 9.7% 9.9% 9.6% 14.3% 11.2% 11.0% 15.1% 17.2% 14.1% Materials 3.5% 4.9% 7.7% 6.1% 8.2% 10.1% 10.5% 9.2% 10.1% 12.1% 11.0% 9.8% 11.7% 12.7% Telecommunication Services 2.4% 0.8% 2.2% 1.4% 5.5% 1.2% 2.4% 1.4% 3.7% 0.0% 0.0% 7.7% 1.3% 2.0% Utilities 3.2% 3.0% 10.2% 1.2% 3.7% 1.7% 2.0% 2.1% 0.9% 0.2% 0.5% 3.3% 3.6% 6.6% Cyclical 71.4% 79.3% 77.3% 86.7% 69.6% 85.3% 85.2% 85.6% 83.5% 85.2% 84.5% 78.6% 81.8% 82.4% Defensive 28.6% 20.7% 22.7% 13.3% 30.4% 14.7% 14.8% 14.4% 16.5% 14.8% 15.5% 21.4% 18.2% 17.6% Sources: Bloomberg,, (09/30/13). Past performance is not indicative of future results. You cannot invest directly in an index. Subject to change. + s Typically Offer More Cyclical Exposure: The small-cap indexes above have higher weights in more cyclical sectors (as opposed to defensive sectors) than do the large-cap indexes. Cyclical sectors are usually tied more closely to economic growth and tend to perform well when the economy is growing or expectations are improving. Also, small caps are often more sensitive to local economic conditions. Depending on investors expectations of future economic growth for a specific region, they could increase or decrease exposure to small caps within that region. + Regional Differences: U.S. small caps have a bias toward health care and technology (which combine to be one-third of the Russell 2000), while most other regions are less exposed to these sectors, especially in Europe or developed international markets. Industrials and Consumer Discretionary stocks tends to be a bigger sector in international indexes, which relates to their greater sensitivity to economic conditions than their international large-cap peers. 7 Cyclical sectors: Include Consumer Discretionary, Energy, Industrials, Materials, Information Technology and Financials sectors; defensive sectors: Consumer Staples, Health Care, Telecommunication Services and Utilities. 5

6 Research MARKET INSIGHTS [ October 2013 ] RECENT SMALL-CAP SECTOR PERFORMANCE From a valuation 8 standpoint, we think it is important to be mindful of the strong performance these indexes have displayed and what that means for their current portfolio allocations. We highlight the United States as an example of large returns in many sectors and discuss why these performance numbers argue that it s a good year to focus on strategies that can manage the valuation risks that come with such strong gains. We could repeat this analysis across the regional indexes but use the United States and the Russell 2000 as a good guide, given its popularity among traditional asset allocation models. FIGURE 5: RUSSELL 2000 INDEX SECTOR PERFORMANCE 45% 40% 35% 39.2% 37.8% 33.9% 33.8% 30% 29.0% 27.7% Performance 25% 20% 15% 10% 22.3% 22.0% 19.5% 11.7% 11.5% 5% 0% Health Care Consumer Staples Information Technology Consumer Discretionary Industrials Russell 2000 Index Financials Sources: Bloomberg, (12/31/12 09/30/13). Past performance is not indicative of future results. You cannot invest directly in an index. Subject to change. + Sector Performance Differences: The best-performing sector, Health Care, outperformed the worst-performing, Materials, by over 27 percentage points. As an investor, it is important to understand whether the underlying fundamentals of the Health Care sector are improving fast enough to warrant the relative performance advantage. + High Absolute Performance: Four of the 10 sectors have returned over 30% through the end of the third quarter, which is over 41% annualized return. Strong performance is well and good, but a potential issue with market capitalization-weighted 9 indexes is that they tend to simply hold what has run up in price instead of rebalancing based on any metric of relative value. In essence, there is no disciplined regular mechanism that attempts to shift weight from what has performed strongly in the past to what may have potential to perform strongly in the future. Energy Telecomm. Services Utilities Materials 8 Valuation: Refers to metrics that relate financial statistics for equities to their price levels to determine if certain attributes, such as earnings or dividends, are cheap or expensive. 9 Market capitalization-weighted: Share price x number of shares outstanding. Firms with the highest values receive the highest weights in approaches designed to weight firms by market cap. 6

7 Research MARKET INSIGHTS [ October 2013 ] IMPORTANCE OF INCORPORATING A FUNDAMENTAL REBALANCE With market capitalization-weighted indexes, when constituents increase in price compared to other stocks, they are gaining a greater weight and impact on the performance of the index. At, we believe a focus on fundamentals is necessary, but that it is even more important after periods of such strong short-term performance. Indexes employ a rules-based rebalancing mechanism that adjusts relative weights based on underlying fundamentals. During the rebalancing process, which occurs once per year for each Index, the relationship between share price performance and either dividend growth or earnings growth is measured. FIGURE 6: VALUATION & REBALANCE DISCIPLINE Stock Price During Year Fundamentals Weight Change at Rebalance Improve Depends on which rose more Flat Decrease Decline Decrease Improve Increase Flat Unchanged Decline Decrease Improve Increase Flat Increase Decline Depends on which fell more + Firms that increased their earnings or dividends but whose share prices have remained constant or declined will typically see increases in weights. + Firms whose earnings or dividends decreased but whose share prices have remained constant or risen will typically see decreases in weights. CURRENT SMALL-CAP VALUATIONS As we mentioned above, valuations matter first, and during periods of strong short-term performance it is especially important to ask whether these moves are justified by the underlying fundamentals. Some have argued that recent performance has stretched the valuations in the small-cap spectrum, so to gain a better understanding, we will compare the price-to-earnings ratio 10 of different small-cap indexes. 10 Price-to-earnings (P/E) ratio: Share price divided by earnings per share. Lower numbers indicate an ability to access greater amounts of earnings per dollar invested. 7

8 Research MARKET INSIGHTS [ October 2013 ] FIGURE 7: INDEX PRICE-TO-EARNINGS RATIOS [ As of 9/30/2013 ] x Price-to-Earnings Ratio U.S. Indexes Developed International Indexes Market Indexes 13.1x 13.5x 13.9x 15.2x 15.2x 15.3x 15.4x 16.0x x 11.5x 10 Market Market International Europe Japan EAFE Sources: Bloomberg, (09/30/13). Past performance is not indicative of future results. You cannot invest directly in an index. Subject to change. + Indexes Have Typically Exhibited Lower Valuations: Compared to their respective market cap-weighted benchmark, Index valuations are low. The annual rebalancing process helps manage valuation risk by consistently shifting weight toward firms that have exhibited greater rates of dividend growth or higher earnings than others. It is in this way that looks to mitigate the risk of being exposed to firms that may have enjoyed strong momentum and price increases but whose valuations have not improved commensurately. + Markets Exhibited the Lowest Valuations: markets are currently displaying the lowest valuation Indexes of all the listed small-cap indexes. It is important to note the impressive 47% discount the Markets Index is currently showing compared to the Russell 2000 Index, which is representative of U.S. small caps. Of course, there are different risks associated with the two regions, but does a dollar worth of emerging market earnings deserve an almost 50% discount to the same dollar of U.S. earnings? Europe Earnings Japan Russell 2000 A CLOSER LOOK AT GLOBAL SMALL-CAP VALUATION Investors have a tendency to get overly enthused about growth prospects, and when this happens there is a tendency to overpay for this potential growth. This has historically been prevalent in small caps. Looking at the price-to-earnings ratio, above, the index that stands out the most as a potential casualty of this bias is the Russell 2000 Index. 8

9 Research MARKET INSIGHTS [ October 2013 ] Apart from the price-to-earnings ratio, another way to measure if individuals are paying too high a price for the underlying fundamentals is the price-to-dividend ratio 11. In the chart below we will look at the 10-year price-to-dividend ratio of the ACWI ex-us Index. This index shows a good contrast with the U.S. index in showing that these valuations are actually lower than their historical averages. + When price growth equals dividend growth, there is no change in the price-to-dividend ratio as dividends didn t become any more or less expensive relative to the price. + When dividends grow faster than the price the price-to-dividend ratio drops, which reflects the markets getting cheaper there are greater amounts of dividends per unit of price. FIGURE 8: ACWI EX-US SMALL CAP INDEX PRICE-TO-DIVIDEND RATIO Price-to- Ratio ACWI ex-us Index 10-Year Average 20 9/30/2003 9/30/2004 9/30/2005 9/30/2006 9/30/2007 9/30/2008 9/30/2009 9/30/2010 9/30/2011 9/30/2012 9/30/2013 Sources: Bloomberg,, (09/30/03 09/30/13). Past performance is not indicative of future results. You cannot invest directly in an index. Subject to change. + Price-to- Ratio Below 10-Year Average: Although the price-to-dividend ratio has been increasing from its most recent low, it is still over 8% below its 10-year average. The ratio is also below its post-recession highs and significantly below its pre-recession highs. Based on the above chart, it would appear that global small caps outside the United States are currently not exhibiting stretched valuations when considering their prices relative to their dividend income. Expanding this analysis from a broad, global ex-us perspective to a more regional analysis, we discuss which regions are selling at the biggest discounts to their historical valuations. 11 Price-to-dividend ratio: Refers to the index price divided by the trailing 12-month dividends. 9

10 Research MARKET INSIGHTS [ October 2013 ] FIGURE 9: REGIONAL PRICE-TO-DIVIDEND RATIOS Large Cap Index Current Price-to- Ratio (P/D) 10-Year (P/D) Average Percentage Difference Markets % S&P % EAFE % Japan % EM % ACWI ex-us % EAFE % Russell % Europe % Sources: Bloomberg,, (09/30/03 09/30/13). Current price-to-dividend ratio is as of 09/30/13. Past performance is not indicative of future results. You cannot invest directly in an index. Subject to change. + Global s Show Similar Price-to- Ratios as the S&P 500 Index: Typically, one might expect small caps to trade at higher premiums than large caps as a result of their higher growth expectations. Of course there are regional differences, but we find it interesting that the EM, EAFE and Europe indexes are all showing similar price-to-dividend ratios as the S&P 500 Index. Note that the Russell 2000 Index has a price-to-dividend ratio of over 80x, which is more than 60% higher than that of the S&P 500. Each foreign small-cap index is significantly lower than the Russell Japan s Display Highest Discount to Historical Average: Looking at the difference in each index s current priceto-dividend ratio compared to their 10-year average, Japan currently is selling at over 17% discount. We feel this is important to note because the Japanese government has taken aggressive action to end deflation by adopting a bold monetary policy and has signaled it will follow up with fiscal and structural reforms. We believe these actions should continue to provide tailwind for Japanese large and especially small caps as the full effects are incorporated into the local economy. 10

11 Research MARKET INSIGHTS [ October 2013 ] CONCLUSION Without question, we feel investors could benefit by including exposure to global small caps in a diversified portfolio over the long term. After such strong recent short-term performance, we believe a focus on a fundamental rebalancing process becomes necessary to potentially manage valuation risk. While market capitalization-weighted indexes by their definition and investment process allocate the greatest weights to the firms with the largest market caps and the stocks that have appreciated the most, Indexes focus on fundamentals either dividends or earnings to determine their constituent weights. We believe this gives Indexes the potential to sell stocks that have become more expensive relative to their underlying fundamentals and buy stocks that have become less expensive relative to their underlying fundamentals. In the global small-cap space, where performance has been particularly strong recently, we believe it is important to take a fresh look at index strategies that focus on relative value. Unless otherwise stated, data source is. Investors should carefully consider the investment objectives, risks, charges and expenses of the Funds before investing. To obtain a prospectus containing this and other important information, call WISE (9473) or visit wisdomtree.com. Read the prospectus carefully before you invest. s are not guaranteed and a company s future ability to pay dividends may be limited. A company currently paying dividends may cease paying dividends at any time. Diversification does not eliminate the risk of experiencing investment losses. There are risks associated with investing, including possible loss of principal. Foreign investing involves special risks, such as risk of loss from currency fluctuation or political or economic uncertainty. Investments focusing on a single sector generally experience greater price volatility. Investments in emerging, offshore or frontier markets are generally less liquid and less efficient than investments in developed markets and are subject to additional risks, such as risks of adverse governmental regulation and intervention or political developments. Investments focused in Japan are increasing the impact of events and developments associated with the region, which can adversely affect performance. Investments focusing on certain sectors and/or smaller companies increase their vulnerability to any single economic or regulatory development. You cannot invest directly in an index. Earnings Index: A fundamentally weighted index that measures the performance of the earnings-generating small-cap segment of the U.S. equity market. The Index comprises the companies in the bottom 25% of the market capitalization of the Earnings Index after the 500 largest companies have been removed. Index: A fundamentally weighted index that measures the performance of the small-capitalization segment of the U.S. dividend-paying market. The Index comprises the companies that constitute the bottom 25% of the market capitalization of the Index after the 300 largest companies have been removed. The Index is dividend weighted annually to reflect the proportionate share of the aggregate cash dividends each component company is projected to pay in the coming year, based on the most recently declared dividend per share. International Index: A fundamentally weighted index that measures the performance of the small-capitalization segment of the dividend-paying market in the industrialized world outside the U.S. and Canada. The Index comprises the companies that compose the bottom 25% of the market capitalization of the DEFA Index after the 300 largest companies have been removed. Companies are weighted in the Index based on annual cash dividends paid. Markets Index: A subset of the Markets Index measuring the performance of the smallest firms by market capitalization comprising 10% of the total market capitalization, weighted by cash dividends. Europe Index: A fundamentally weighted index meant to measure the performance of small-cap European dividend-paying equities, weighted by cash dividends paid. Japan Index: Designed to provide exposure to dividend-paying small-capitalization companies in Japan. Russell 2000 Index: Measures the performance of the small-cap segment of the U.S. equity universe. The Russell 2000 is a subset of the Russell 3000 Index, representing approximately 10% of the total market capitalization of that index. It includes approximately 2,000 of the smallest securities based on a combination of their market cap and current index membership. S&P 500 Index: A market capitalization-weighted benchmark of 500 stocks selected by the Standard and Poor s Index Committee, designed to represent the performance of the leading industries in the United States economy. EAFE Index: A market cap-weighted index composed of companies representative of the developed market structure of 22 developed countries in Europe, Australasia and Japan. Markets Index: A broad market cap-weighted index showing the performance of equities across 21 emerging market countries defined as emerging markets by. EAFE Index: A free float-adjusted market capitalization equity index that captures small-cap representation across developed market countries around the world, excluding the U.S. and Canada. Markets Index: A broad market cap-weighted index showing the performance of equities across 21 emerging market countries defined as emerging markets by, specifically focusing on the small-cap segment of these equity markets. Europe Index: A free float-adjusted market capitalization-weighted index designed to measure the performance of developed equity markets in Europe, specifically focusing on the small-cap segment of these equity markets. Japan Index: A market cap-weighted index that measures the performance of the Japanese equity market, specifically focusing on the small-cap segment of these equity markets. ACWI ex-us Index: A free float-adjusted market capitalization-weighted index designed to measure the equity market performance of developed and emerging markets excluding companies based in the United States. ACWI ex-us Index: A free float-adjusted market capitalization-weighted index designed to measure the equity market performance of developed and emerging markets excluding companies based in the United States, specifically focusing on the small-cap segment of these equity markets. ACWI Index: A free-float adjusted market capitalization-weighted index that is designed to measure the equity market performance of developed and emerging markets. ACWI Index: A free-float adjusted market capitalization-weighted index that is designed to measure the equity market performance of developed and emerging markets, specifically focusing on the small-cap segment of these equity markets. Funds are distributed by ALPS Distributors, Inc. Jeremy Schwartz and Tripp Zimmerman are registered representatives of ALPS Distributors, Inc Investments, Inc. is a registered mark of Investments, Inc. WIS /