Why small and mid caps can be an important building block within a well-diversified portfolio

Many investors focus primarily on large, well-known listed companies. Understandable, since these companies often dominate the headlines and stock market indices. Yet large caps represent only part of the global investment universe.

For investors seeking a broadly diversified equity portfolio, small and mid caps can also play an interesting role. These companies provide access to different growth dynamics, sectors and opportunities than the largest listed companies.

Why invest in small and mid caps?

1. Potential for long-term wealth growth — Smaller companies are often at an earlier stage of development than established market leaders, giving them more room to grow revenue, profit and market share. Historical data shows small and mid caps have contributed valuably to portfolio returns over certain long periods — though past performance is no guarantee of future results.

2. Access to tomorrow's growth companies — Many successful listed companies once started out small. Small and mid caps give investors access to companies actively working on growth, innovation and market development.

3. Greater diversification within the portfolio — Global equity indices today are strongly influenced by a limited number of very large companies. Investing in small and mid caps too gives access to a broader group of companies, more sectors and different economic developments.

4. Innovation and entrepreneurship — Many innovative products, services and business models emerge from companies still in development. Small and mid caps provide access to companies responding to new trends, technologies and market opportunities.

5. Opportunities outside the spotlight — While large listed companies are followed daily by analysts and media, smaller companies often receive less attention, leaving room for active investors to identify attractive companies through in-depth research.

6. Participation exemption for corporate investors — Because Teslin holds stakes of more than 5% in two of its three equity funds, Teslin Participaties and Gerlin Participaties, these funds let investors who invest through their BV make use of the participation exemption — dividends received and realised capital gains are exempt from corporate income tax.

What does this mean for your investment portfolio?

A balanced equity portfolio often consists of companies of different sizes. Large caps provide exposure to established international companies, while small and mid caps offer additional diversification and access to other parts of the economy. The optimal allocation differs per investor, depending on objectives, investment horizon and risk appetite.

Why choose Teslin?

Teslin has focused on investing in small- and mid-cap companies for 35 years. With a long-term vision, fundamental analysis and active shareholder engagement, Teslin looks for companies with strong business models, engaged management teams and sustainable long-term value creation — aiming to identify opportunities that are less visible within the major stock market indices.

More diversification and growth potential

For investors seeking a broadly diversified equity portfolio, small and mid caps can be a valuable addition, offering:

✓ access to a broader part of the equity universe ✓ additional diversification opportunities ✓ exposure to innovative and growing companies ✓ a different risk-return profile than large caps ✓ opportunities beyond the largest listed companies