The S&P Global BMI’s small-cap segment provides the most comprehensive measure of global small-cap securities in the market. Introduced in 1989, the S&P Developed SmallCap was the first global index covering the small-cap size range.1 At the time, international equity investing almost exclusively focused on large- and mid-cap companies, as defined by MSCI’s “Standard” index series. However, this new index offering paved the way for increased adoption of international small caps as a unique market segment. Many institutional investors now use “all-cap” indices as policy benchmarks for international equity asset classes as well, given their inclusion of dedicated international small-cap exposures.
In this second blog in a series highlighting key features of the global equities benchmark landscape, we explore how the small-cap subset of the S&P Global BMI provides unmatched breadth and flexibility to market participants in measuring the universe of global small-cap companies.
Comprehensive Small-Cap Coverage
The small-cap portion of the S&P Global BMI is defined as the bottom 15% of float market cap in each country. In addition to its extensive history, the S&P Global SmallCap offers significant depth into the market capitalization spectrum, as it reaches much further into relatively smaller constituents. As shown in Exhibit 1A, the S&P Global BMI includes more than 9,200 companies in its small-cap segment, while the MSCI and FTSE benchmarks include about 5,700 and 5,000, respectively. Exhibit 1B shows the relative size characteristics, demonstrating how the additional member count within the S&P Global SmallCap allows for extended reach, far surpassing the all-cap universe of alternatives.
Cap Range Indices Provide an Alternative Way to Measure Small-Cap Equities
While the S&P Global SmallCap, MSCI ACWI Small Cap, and FTSE Global Small Cap take a relative approach to defining company size based on the equity market composition in each country, the S&P Global BMI also offers an alternative approach to provide greater flexibility to market participants. The S&P Global BMI Cap Range Index Series breaks down the world’s stock markets according to absolute levels of total company market capitalization. For example, a popular definition of small caps is to include all companies with total market caps below USD 2 billion. This approach differs substantially from the standard relative sizing approach since a fixed market cap is applied across all global equity markets. Exhibit 2 illustrates the range of standard cap range indices included within the S&P Global BMI Index Series.
The S&P Global SmallCap has been integrated into the S&P Global BMI since its inception, creating a comprehensive all-cap benchmark exposure with historical continuity. The S&P Global SmallCap Indices are available at the country, region, and developed or emerging level, as well as in additional cap range specific segments, offering market participants a deep and flexible framework for measuring global small-cap equities. To learn more about the consistent history of the S&P Global BMI Index Series, see The S&P Global BMI: Providing Consistent Insights into Global Equity Markets since 1989.
1 The index was previously called the Salomon Smith Barney World Extended Market Index.The posts on this blog are opinions, not advice. Please read our Disclaimers.