We use a small cap GARP model. It has a one-year return of 29% which beat its small cap benchmark, but essentially tied the S&P 500 TR. It trails all our other models. YTD it us up 5.5%. But we look for liquid small caps as our positions are large. And no micro caps - we never want to acquire more than 5% of a company’s stock.
We use it for diversification - we like to use relatively uncorrelated models (less than 0.80, and preferably much less). We know small caps will come back in favor at some point.
I think I agree a lot with this take… Basically value underperformance is a correlation of sector performance. Growth indexes are dominated by tech and consumer discretion. Value indexes are dominated by financials and healthcare. Technology sector has ran laps around financials over the last 10 years. Any surprise this correalates to a zero rate policy world where financials get very little return on assets (and a huge new weight of government regulation since 2009) while tech is able to fuel speculative growth with essentially free money?