July 22, 2026By Hyung Kim

Quality at a Discount

International Small Cap 2Q 2026 Update | KayneCast 317

“When you can own durable, high-quality businesses at a valuation that no longer demands a premium, I think that’s a good opportunity.”

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 2Q 2026.

Key Insights and Trends

  • Market leadership remained highly concentrated, with AI-related businesses and Asian technology companies driving much of the quarter’s returns
  • Relative performance was impacted primarily by the strategy’s underweight position in information technology during a period when higher-leverage, higher-valuation, and higher-momentum companies led the market
  • The portfolio’s valuation premium to the benchmark has disappeared, resulting in the strategy trading at a discount despite maintaining higher-quality business characteristics
  • As market leadership remains concentrated in a small number of AI-driven companies, quality international small caps may offer differentiated exposure to local economic growth and business fundamentals
  • Primary contributors and detractors to the International Small Cap strategy

Stay Informed with Our Latest Insights

For more insights, read our 2Q 2026 Market Review Commentary or subscribe to KayneCast where we provide the latest updates from the KAR Investment Team on our investment strategies.

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KARCast is the official podcast series of KAR. This material is provided as a matter of general information and is not intended to be relied upon as a forecast or research. The opinions expressed herein are those of the speakers and are not necessarily the opinions of KAR or its affiliates, are current as of the date and time of the recording, and are subject to change at any time due to changes in market or economic conditions. The information and opinions contained in this material are derived from proprietary and non-proprietary sources deemed by KAR to be reliable and are not necessarily all inclusive. KAR does not guarantee the accuracy or completeness of this information. Any securities included in this podcast are based on objective, non-performance based criteria and such mentions should not be considered a recommendation to purchase or sell the securities mentioned. This podcast should not be construed as an offer or solicitation to purchase or sell any security. KAR’s strategies may not be suitable or appropriate for all investors depending on their specific investment objectives and financial situation. Potential investors should always consult with their own financial professional before determining whether to invest in a particular investment or investment strategy. Reliance upon information in this material is at the sole discretion of the listener. To the extent any performance is discussed, past performance is not indicative of future results.