| ANNUALIZED SINCE INCEPTION | QUARTERLY | YTD |
|---|---|---|
| 9.8% | 3.4% | 10.5% |
| 2025 | 2024 |
|---|---|
| 10.5% | 12.3% |
The Bailard Small Cap Value Strategy edged out a win versus the Russell 2000 Value Index in Q4 2025, posting a 3.4% net return compared to the benchmark's 3.25%. While disappointing to lose to the index for the first time in seven years with a -2.06% annual underperformance, the strategy continued to fare well against competitors, finishing in the top quartile for both the quarter and full year. Value stocks of all sizes won in Q4 after October's junk stock rally subsided in November and December, reverting to more typical performance where quality and value characteristics were rewarded. The strategy's proprietary Bailard Ranking Model produced positive results for the quarter, with the Earnings Quality factor moderately positive and the Hype factor rebounding strongly. Looking ahead, while return drivers are currently slightly negatively biased against small cap value outperformance, the relative valuation differential between small value and large growth remains at high levels. Economic prospects look decent for 2026 with expected tax cuts, deregulation, and continued Fed easing supporting growth.
The Bailard Small Cap Value Strategy invests in companies believed to be attractively valued, under scrutinized, and irrationally mispriced, leveraging behavioral finance anomalies and systematic methods to identify potential winners in the small and micro cap value universe.
On balance, historically significant return drivers for small cap value stocks are currently slightly negatively biased against small cap value outperformance. However, the relative valuation differential between small value and large growth remains at a high level and may more than fully discount this. Economic prospects look decent for 2026 with catalysts including tax breaks, deregulation, and further Fed easing.
| Date | Letter | Tickers | Keywords | Pitches | Quick Takes |
|---|---|---|---|---|---|
| Feb 6 2026 | 2025 Q4 | - | AI, Behavioral Finance, Micro Cap, Performance, quantitative, small cap, value | - | Value stocks of all sizes won in Q4 and small cap and micro cap value beat other equity styles over the past two quarters. November and December reverted to more typical relative performance, where characteristics associated with historical success such as quality and value were once again rewarded by investors. Artificial intelligence is a rapidly growing influence in asset management with 54% of investment managers currently using AI for investment strategy research. Bailard has been prudently employing AI tools since 2018 with task-specific applications, reliable data sources, and proper oversight to avoid common AI hazards like biases and hallucinations. Small cap value prevailed over small cap growth in Q4. The strategy focuses on small and micro capitalization U.S. equities that exhibit value characteristics, with 35.2% micro cap exposure versus 18.3% in the benchmark. Small cap stocks are generally more highly leveraged than large cap stocks, so lower interest rates tend to benefit them. |
| Oct 31 2025 | 2025 Q3 | - | Earnings Quality, Esg, Factor Investing, Meme Stocks, Microcaps | - | Q3s junk and meme-stock rally hurt quality-tilted small value managers, but Bailard sticks to a disciplined multi-factor process and NFI risk controls. They view small cap values relative valuation as attractive despite mixed macro drivers and highlight persistent peer-ranked efficiency (see rankings on page 7). The strategy uses diversified sector exposure and Thriving on the Edge holdings to navigate junk-led bursts. |
| Jul 18 2025 | 2025 Q2 | - | Balance Sheets, Mean reversion, small caps, valuation, value | - | The letter emphasizes overlooked small-cap companies trading at discounts to intrinsic value due to market concentration and risk aversion. Management focuses on balance sheet strength, normalized earnings power, and downside protection while waiting for valuation mean reversion. Small-cap value is positioned as an attractive hunting ground amid widening dispersion. |
| Mar 31 2025 | 2025 Q1 | - | - | - | |
| Dec 31 2024 | 2024 Q4 | - | - | - | |
| Sep 30 2024 | 2024 Q3 | - | - | - | |
| Jun 30 2024 | 2024 Q2 | - | - | - |
| QUARTER | THEMES | TAGS |
|---|---|---|
| 2025 Q4 |
AIAI has been integrated into RGA's research process through tools like NotebookLM, Gems in Gemini, and Claude Code. The firm views AI as a force multiplier for human judgment rather than a replacement, emphasizing the Kasparov Law principle. They believe the market narrative around AI displacement is swinging to unhelpful extremes, creating investment opportunities. |
Machine Learning Automation Software Productivity Innovation |
Small CapsSmall caps getting strong start in 2026 supported by easing monetary conditions and constructive fiscal backdrop. Small caps more sensitive to economic cyclicality which is overdue for expansion. Expected to grow at better pace than large caps in 2026 after long period of underperformance. |
Value Growth Cyclical Monetary Policy Fiscal Policy | |
ValueManager emphasizes investing in controlled companies trading at significant discounts to NAV, with European holding companies showing discounts of 30-68%. The strategy focuses on securities mispricing where real value exists, contrasting with overvalued technology stocks. |
Discounts NAV Mispricing Undervalued Controlled | |
| 2025 Q3 |
Small CapsSmall caps getting strong start in 2026 supported by easing monetary conditions and constructive fiscal backdrop. Small caps more sensitive to economic cyclicality which is overdue for expansion. Expected to grow at better pace than large caps in 2026 after long period of underperformance. |
Value Growth Cyclical Monetary Policy Fiscal Policy |
| 2025 Q2 |
ValueThe manager continues to find attractive value opportunities despite expensive markets, purchasing undervalued companies like Centene, GlaxoSmithKline, Carrefour and PayPal trading at low multiples with strong fundamentals. |
Undervalued Low Multiples Contrarian Opportunistic |
| Date | Pitch Type | Author | Ticker | Company | Industry | Sub Industry | Bull / Bear | Exchange | Keywords | Action |
|---|---|---|---|---|---|---|---|---|---|---|
| No Elevator Pitches found | ||||||||||
| TICKER | COMMENTARY |
|---|---|
| No ticker commentary found. | |
| Ticker | Put/Call | Amount Bought | Shares Bought | % Change | Weight % |
|---|---|---|---|---|---|
| No Recent Buys Data | |||||
| Ticker | Put/Call | Amount Sold | Shares Sold | % Change | Weight % | Status |
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| Industry | Prev Quarter % | Current Quarter % | Change |
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