“It is tempting to assume that companies adopting AI will automatically become more productive and earn higher margins. However, if everyone, including your competitors, can adopt AI, much of that benefit may be competed away, over time.”
Each quarter, Hyung Kim, Portfolio Manager and Senior Research Analyst, provides an update on the performance of the International Small Cap strategy and shares his market outlook. Listen to his most recent episode where Hyung recaps market activity during 3Q 2026.
Key Insights and Trends
- International small cap markets posted modest gains during the quarter, with energy, banks, and metals and mining leading, while real estate, technology, and utilities trailed
- The strategy has less exposure than the benchmark to semiconductors and other perceived direct AI beneficiaries, reflecting uncertainty around where the long-term economic benefits of AI will ultimately accrue
- The strategy is trading at a discount to the benchmark despite maintaining the quality characteristics that have historically supported a premium, including higher returns on equity, lower leverage, and more consistent earnings
- Company fundamentals showed both strengths and weaknesses during the quarter, while overall portfolio earnings growth remained positive and reasonably broad
Stay Informed with Our Latest Insights
For more insights, read our 3Q 2026 Market Review Commentary or subscribe to KayneCast where we provide the latest updates from the KAR Investment Team on our investment strategies.
KayneCast is available on Apple Podcasts and Spotify.
