5 Reasons to Consider a Mid Cap Value Fund

Number 1

Strong Performance

The asset class is faring well in the current market. Year to date, mid-caps have outperformed other asset classes as of July 31, 2016.


 
Year-to-Date (%) 1-Year (%) 3-Year (%) 5-Year (%) 10-Year (%)
Mid-Caps (Russell Midcap® Index) 10.31 4.37 10.37 12.73 8.79
Large-Caps (Russell 1000® Index) 7.69 4.84 10.93 13.22 7.89
Small-Caps (Russell 2000® Index) 8.32 0.00 6.74 10.43 7.17
 
Moreover, over longer periods of time, mid-caps have a track record for outperforming large- and small-cap stocks, providing much-needed diversification during cycles when other market cap ranges are struggling.
 

Number 2

Opportunities for Active Managers

Fewer analysts typically cover mid-cap companies than their larger counterparts. This creates opportunities for active portfolio managers, like Heartland, to identify unloved and underfollowed companies with upside potential.

Number 3

Attractive Valuations

Today’s low-interest-rate environment seems potentially favorable to the mid-cap area of the market. Not only do mid-caps tend to outperform large-caps during periods when interest rates rise, but actively managed funds seem particularly well-positioned because:

Attractive Valuations - Flow Chart

 

Number 4

Relatively Nimble Businesses

In times of macroeconomic change, mid-caps often benefit from being more nimble than larger companies. They can more quickly hire workers, redeploy resources, or adjust production. In short, they often can more readily adapt to change.

Number 5

Insulation from Global Volatility

Mid-caps usually are more insulated from global uncertainty and volatility, but they also stand to benefit if investments in the U.S. stock market increases.
 
Most large-cap companies have exposure to international markets. They export their products across continents, import critical manufacturing components, market globally, etc. Mid-cap companies, on the other hand, have less international exposure and may be more insulated from geopolitical events, such as Brexit or ongoing concern about growth potential in China. 
 
The uncertainties created by those same events in the United Kingdom and China may also help drive up interest in the U.S. stock market, which recently has offered better relative growth. If the U.S. market continues to provide consistent returns, investors could move down the capitalization scale, likely reallocating first from larger-cap names into the mid-cap space.  
 

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Past performance does not guarantee future results.

The Mid Cap Value Fund invests in a smaller number of stocks (generally 30 to 60) than the average mutual fund. The performance of these holdings generally will increase the volatility of the Fund’s returns. The Fund also invests in mid–sized companies on a value basis. Mid-sized securities generally are more volatile and less liquid than those of larger companies. There can be no assurance that the Fund will grow to or maintain an economically viable size, in which case the Board of Directors may determine to liquidate the Fund.

Value investments are subject to the risk that their intrinsic value may not be recognized by the broad market.

Economic predictions are based on estimates and are subject to change.

Heartland’s investing glossary provides definitions for several terms used on this page.

The Heartland Funds are distributed by ALPS Distributors, Inc.

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