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Analysen 26.11.2021

The strong performance potential of Swiss small and mid-cap equities

The strong performance potential of Swiss small and mid-cap equities

The Swiss small- and mid-cap (also known as “SMID-cap”) universe offers a balanced and diversified exposure to companies with long-term value-creation potential. Active managers can create significant added value through a disciplined stock-selection process.


Swiss small and medium-sized listed companies have long delivered higher performances than the wider Swiss stock market index. Since 2000, the SPI Extra, the index that tracks Swiss SMID-caps, has delivered 454% in total return, compared to a 231% total return for Switzerland's wider stock index, the SPI. 

Swiss SMIDs have also proved to be resilient since the start of the pandemic. In fact, despite a bigger drawdown and a somewhat faster correction in difficult markets, the SPI Extra has recovered quickly and outperformed the SPI index by a strong margin since early 2020.

An improving value-creation profile

The strong performance of the Swiss SMID-cap segment has been driven by an improving value-creation profile, as assessed by the CFROI®1  spread (CFROI® minus the cost of capital). This measure, which enables investors to gauge a company’s value-creation ability, has shown a stronger trend for the SPI Extra than for the SPI over recent years.

The increasing integration of ESG criteria has also been an enabler of value-creation, as Swiss companies have little exposure to value-destructive industries or activities such as energy or automobiles.

Participation in post-pandemic recovery

The performance results of Swiss SMID-cap companies can also be explained by their distinctive characteristics, which are supportive of their long-term growth prospects:
 
  • Good pricing power in their respective end-markets
  • Profitable and flexible supply chains
  • Leading niche market positions
  • Strong value-added products with high margins 
  • Significant innovation 
  • Market shares in growing market segments. 
These elements should also enable Swiss SMIDs to participate significantly in the strong post-pandemic demand across many sectors, while weathering the challenges of supply chain disruptions and commodity price pressures. 
 
 

1Cash Flow Return on Investment, source Credit Suisse HOLT


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Eleanor Taylor Jolidon
Co-Head of Swiss and Global Equity
View her Linkedin profile

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Ariane Kesrewani
Investment specialist
View her Linkedin profile


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