Why American Funds Smallcap World Is a Great Option for Global Small Caps

Key Morningstar Metrics for American Funds Smallcap World

• Morningstar Category
  : Global Small/Mid-Stock
• Morningstar Medalist Rating
  : Gold
• Process Pillar
  : Above Average
• People Pillar
  : High
• Parent Pillar
  : High

American Funds Smallcap World’s SMCWX host of experienced managers and a formidable analyst bench set it apart from its peers. With a global small-cap universe of roughly 6,000 companies, a large team is a significant edge.

The breadth of resources that Capital Group has dedicated to Smallcap World reflects its size. It is by far the largest fund in the global small/mid-stock Morningstar Category with nearly $90 billion in assets under management as of Sept. 30, 2026. The firm manages the large asset base by splitting it between its three equity subsidiaries. Seventeen named managers use their own investment styles to independently run sleeves of the portfolio, drawing on the work of roughly 150 analysts. The fund also includes a research sleeve from each subsidiary’s analysts.

Lead Principal Investment Officer Julian Abdey allocates capital among the managers and research portfolios, working closely with PIOs Brad Freer and Dimitrije Mitrinovic, who oversee their respective subsidiary teams. Under Abdey’s watch, the team has taken steps to reduce the research sleeve to just less than one-third of assets while reducing the total number of holdings to around 800. Bottom-up research drives portfolio construction, though the firm’s quantitative research group helps the team monitor the characteristics of the overall fund. On average, the portfolio leans toward higher-growth companies at the larger end of the small-cap spectrum because managers tend to hold on to their winners as they expand beyond standard small-cap size.

The strategy hit a rough patch from 2024 to 2025, but recent gains have improved its results over standard trailing periods. Through September 2026, it lagged the MSCI ACWI Small Cap Index but beat the average global small/mid-stock category peer in the trailing one-, three-, and five-year periods. The portfolio’s growth tilt was a headwind as international value stocks rallied for much of 2025, but some stock-picking misses also weighed it down. Sandisk SNDK, which entered the benchmark in June 2025, then returned a cumulative 4,516% through September 2026, was a notable omission. The fund gained a cumulative 25.4% during the period, more than 5 percentage points behind the benchmark but ahead of the average category peer.

The strategy’s capable team is well-equipped to parse the vast global small-cap universe, so it remains a strong option in an asset class with limited passive alternatives.

American Funds Smallcap World: Performance Highlights

The strategy’s long-term record is still solid, though its edge has narrowed after bouts of underperformance since 2021. Through September 2026, the R6 shares outpaced the MSCI ACWI Small Cap benchmark and global small/mid-stock category peers over the past 15 and 20 years but lagged the index in the trailing one-, three-, and five-year periods. It still placed in the top half of the category, however.

The fund’s 14% return for the 12 months through September 2026 put it in the top third of the category. AI infrastructure beneficiaries like Lumentum LITE, Global Unichip 3443, and Comfort Systems FIX were among the largest contributors to performance. Sectors where the strategy has historically been light relative to the index, like consumer discretionary and real estate, were among the largest detractors.

The fund has typically lagged when value stocks beat growth. Since 2005, it trailed the index in 10 of 11 periods of at least multiple months when international value stocks outpaced growth. That includes trailing by 6 percentage points from June 2025 through February 2026. It also fell 11 percentage points more than the index in 2022. Yet, investors who held through these bouts of underperformance have done well. From longest-serving manager Brady Enright’s November 2004 start through September 2026, the fund gained an annualized 9.1%. That was narrowly ahead of the index and 1.8 percentage points ahead of the average category peer. It outperformed the category in 92% of rolling five-year periods and the index 69% of the time.