Over the past two decades, European small-cap equities have consistently demonstrated their potential to enhance portfolio performance. Historical data shows that small caps have outperformed large caps by an average of 2% per annum over the last 20 years.

The global economy has recently weathered significant disruptions—from the COVID-19 pandemic and inflationary pressures to supply chain challenges and geopolitical tensions. These factors have introduced a high degree of uncertainty, prompting investors to seek safety in larger, more established companies—a shift which has notably impacted small-cap stocks that have underperformed relative to their large-cap counterparts.

The idea for exchange-traded funds was born in the aftermath of the Black Monday crash in 1987. In its evaluation report of that day, the U.S. Securities and Exchange Commission floated the idea of a product for trading baskets of stocks, suggesting such a novel product could be beneficial for market liquidity. This served as the inspiration to submit a dossier to the SEC the next year, proposing the establishment of the SPDR S&P 500 Trust. Yet, it took until 1993, after many back-and-forth discussions, before it was eventually launched as the first US ETF.