Advisors Shift Allocations to Small- and Mid-Cap Stocks

At last week’s VettaFi Mid-Year Market Outlook Symposium, 39% of surveyed advisors indicated plans to add U.S. small- and mid-cap equities in the second half of 2026, citing concerns about heavy weighting in a few large technology firms.

The VettaFi survey asked which investment styles respondents expect to increase heading into H2 2026. The results showed 39.3% selecting U.S. small- and mid-cap equities, 35.3% selecting emerging markets equities, 32.0% selecting U.S. large caps and 30.0% selecting developed international equities. Respondents could select more than one option.

Presentations at the symposium included passive index alternatives and active strategies for gaining smaller-company exposure. The Invesco Nasdaq Next Gen 100 ETF (QQQJ) was presented as a complement to the Nasdaq-100 ETF, tracking the next 100 non-financial firms listed on the Nasdaq exchange. QQQJ’s sector composition was shown at about 37% information technology, 19% healthcare and 18% consumer discretionary, compared with roughly 67% technology exposure in the Nasdaq-100 ETF.

The VictoryShares Small Cap Free Cash Flow ETF (SFLO) was described as an index-based approach that filters for companies with higher free cash flow yields and growth. SFLO’s sector weights shown at the symposium included about 31% technology, 17% energy and 16% healthcare. VettaFi is the index provider for SFLO and receives an index licensing fee; SFLO is not issued, sponsored or endorsed by VettaFi.

Speakers also highlighted actively managed funds for the small- and mid-cap space. The Fidelity Fundamental Small-Mid Cap ETF (FFSM) was described as combining quantitative screens with bottom-up research from Fidelity’s small-cap teams. The T. Rowe Price Small-Mid Cap ETF (TMSL), which reached three years of live performance history, was presented as focusing on companies with strong management, healthy balance sheets and disciplined capital-allocation policies.

Symposium materials and the survey together outlined options advisors are considering to adjust client portfolios that have become concentrated in a small group of large-cap growth leaders. Replays and related materials from the event were made available to attendees.