The following is an excerpt from our recently published SWS Growth Equity 1Q2021 strategy update, which is available in its entirety via pdf or audio stream. In the full piece, we provide our take on sifting through an increasingly volatile equity market backdrop, while assessing the strategic merits of our internally managed strategy for public growth-style equity.
After enduring a year of drastic outcome disparities in public equity, we're reminded of an often-misconstrued aspect to large cap investing. The asset class tends to garner perceptions that higher "efficiency" translates into an inability to generate sustainable and attractive returns, either relative or absolute. The cited culprits range from a disproportionately higher amount of sell-/buy-side analyst eyeballs, deeper pools of liquidity, tighter bid/ask spreads, or name-brand awareness by investors among the blue chips. The embedded implication behind these factors is that large-cap cash flows are somehow easier to predict than that of more obscure or smaller cap issuers.