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Small Cap Growth Equity Portfolio
Small Cap Growth Portfolio IB Asset Management
The Small Cap Growth portfolio is a portfolio designed to systematically deliver return and risk characteristics of small cap growth stocks within the US equity market. The portfolio is implemented using a rules-based approach and offered at a relatively low cost.
A factor-based approach to portfolio construction is grounded in academic research. The goal is to achieve an alternative risk-return profile, which is more attractive than a simple capitalization-weighted index such as the Russell 2000. IBKR Asset Management has undertaken research and back-testing to decide on the fundamental factors and rules used to construct this portfolio.
The portfolio is constructed using a rules-based algorithm to determine position allocations. The portfolio is rebalanced quarterly and stocks exhibiting attractive growth characteristics have a greater chance of being included.
The portfolio targets an allocation of 300 long positions. Stocks with attractive growth ratios receive higher allocations, and both trailing and forward earnings growth measures are considered when determining allocations. Even if a company reports better than expected past results, analyst forward estimates are also important in determining attractiveness of the stock. As a form of risk control, the portfolio construction process is designed to penalize high volatility in stocks and avoid excessive concentration in single sectors of the market.