Over the last few decades, a structural shift in the equity markets has been gathering momentum. Much of the growth arc that once happened in public markets has migrated to private markets. Companies arrive in public markets larger, more mature, and at much higher valuations than they used to.
That change in where growth happens, and the up-market IPO onramp, has meaningfully altered what each market capitalization tier is best positioned to contribute to performance. Our philosophy follows the evidence.
Companies used to need access to public markets capital to scale. They entered as small or micro caps, grew through the public markets, and indexes captured that entire arc of value creation. That model no longer describes how, and where, the most consequential companies in the economy develop.
Private capital under management has grown from under $1 trillion in 2000 to over $16 trillion today.
Companies no longer need public markets to scale. They have all the capital they need. What they come to public markets for is liquidity, and that distinction changes how we should think about the mechanics of each capitalization tier.
SOURCE - MCKINSEY GLOBAL PRIVATE MARKETS REPORT 2026Small cap is not a growth story anymore, because high-growth companies no longer IPO as small caps. It is a quality and value opportunity. The degree to which companies are periodically mispriced increases as market cap decreases. The contribution small cap is best positioned to make: well-run companies priced at a significant discount to intrinsic value.
Scaled private companies most commonly enter public markets in the mid cap range with established business models, meaningful revenue, and early institutional ownership already in place. This creates a distinct momentum dynamic that represents the contribution mid cap is best positioned to make.
Large cap companies are the most efficiently priced securities in public markets. Complex factor models add cost and turnover without adding alpha. The right approach here is structural: a thoughtful Quality Gate to remove capital destroyers, then own the top companies by investable market size. The contribution large cap is best positioned to make: broad market beta, held efficiently, with the noise filtered out.
We appreciate what indexes bring to the table. They are cost-effective, disciplined, transparent, and rules-based. A well-constructed index imposes exactly the kind of discipline that keeps an investment philosophy intact and aligned over time.
However, most indexes are "one dimensional," applying a single methodology across their base universe. The shift of growth towards private markets impacts what each market capitalization tier is actually positioned to contribute. As a result, a uniform approach leaves significant value on the table.
What would an index look like if it were built from the ground up as a portfolio management tool? We believe the answer is a "three dimensional" index. Three unique sleeve methodologies, thoughtfully blended to optimize broad market exposure, executed with index discipline and precision.