Small Cap

In the small cap strategy, the first step in our process is our sector factors, a set of qualitative judgments that set us apart by focusing our attention on more productive industries while biasing us against the more accident-prone or difficult-to-manage companies. There are specific factors for each of the five major sectors: in consumer we avoid fashion risk and look for brand loyalty, with a preference for staples; in financials we avoid spread businesses and focus on niche opportunities; in health care we seek to minimize our exposure to government reimbursement risk and invest in technologies that improve outcomes; in industrials we look for innovators and/or problem solvers and avoid capital-intensive business; and in technology we avoid rapid product obsolescence, which leads us to the software industry and away from hardware. Companies that clear the sector factors then go through a fundamental analysis of company attributes. If a security passes this evaluation, the final phase of the process is the valuation analysis. Only once a security has gone through these phases will the idea be formally presented for discussion around potential inclusion in the portfolio. If the team decides the security is going to be added to the portfolio, they will also discuss an entry strategy and the position size.

UNIVERSE | S&P SmallCap 600 & rUSSELL 2000

Small Cap Equity Process

1. Sector Factors


Brand Loyalty, Low Fashion Risk


Niche Focus, Avoid Spread Business

Health Care

Minimize Exposure to Government Payors


Problem Solvers, Innovators


Low Obsolescence Risk

2. Company Attributes

  • High Returns
  • Low Debt
  • Quality Earnings
  • Sincere and Capable Management
  • Superior Relative Growth
  • Stable Business Models

3. Valuation Analysis

  • Discounted Cash Flow
  • Historical M&A Activity and Comps 
  • Strategic Value

Portfolio Construction

Number of Names 65-100
Maximum Position Size 5%
Sector Weightings 75–125% of S&P SmallCap 600
or no more than 25% in any one of the five major sectors
Market Capitalization
(at initiation of purchase)
Constituent of either Russell 2000 or S&P SmallCap 600 Index
or within range of Russell index as of its most recent reconstitution 

Ultimately, we see three opportunities to
realize capital appreciation over time.


The stock price rising to a premium to our estimate of Fair Value.


The business growing to scale and increasing our estimate of Fair Value at a faster rate than market appreciation.


The company being acquired.

Performance | % As of 03.31.24

Small Cap Equity Performance

GRoss Return Net Return Russell 2000 S&P SmallCap 600
Quarter-to-Date 3.17 2.91 5.18 2.46
Year-to-Date 3.17 2.91 5.18 2.46
1-Year 13.66 12.53 19.71 15.93
3-Years – Annualized 1.17 0.16 -0.10 2.28
5-Years – Annualized 8.49 7.41 8.10 9.14
7-Years – Annualized 9.24 8.15 7.73 8.52
10-Years – Annualized 10.18 9.08 7.57 8.79
Annualized (01.01.96)
12.88 11.75 8.41 10.16
Cumulative (01.01.96)
2,968.77 2,213.77 880.74 1,442.85

Source: Champlain Investment Partners. Disclosure: Past performance is not indicative of future results. Gross returns are presented before management and custodial fees but after all trading expenses. Net returns are calculated by deducting a model management fee of 1.00% per annum, which is the highest tier of the standard fee schedule for the Small Cap Composite. The full standard fee schedule for the composite is 1.00% on the first $50 million, 0.85% on the next $50 million, and 0.75% over $100 million. Actual investment advisory fees incurred by clients may vary, including for those clients who may opt to negotiate a performance fee, which may lead to higher or lower performance than stated above. Performance presented prior to September 17, 2004 occurred while the person primarily responsible for achieving performance results was affiliated with a prior firm. This information is presented as supplemental to the “Small Cap Disclosure” linked below.