Strategy Overview

U.S. Mid-Cap Value & Growth Strategy (VOE + IWP)

A rules-based mid-cap equity strategy combining value and growth exposures via VOE and IWP. This page describes the investment thesis, deployment plan, macro-driven tilt rules, and risk framework in a format that can be consumed by a model for interrogation and assessment.

Asset: U.S. mid-cap equities
Strategy Type: Core + Tactical (Style Tilt)
Instruments: VOE (value) & IWP (growth)
Review cadence: Quarterly
Baseline: Nov 2025
As of: Jan 2026
Change set: USMIDCAP_2025_11_REASSESS_V1

Core Investment Thesis

Mid-cap sweet spot

The strategy targets the long-run outperformance potential of U.S. mid-cap equities while managing style risk between value and growth. VOE provides diversified exposure to fundamentally cheaper, income-generating mid-caps; IWP provides exposure to higher growth mid-caps with stronger earnings trajectories. The combination seeks to capture the historical "sweet spot" of mid-caps: established businesses with meaningful growth runway.

Why U.S. Mid-Caps?

  • Historically competitive or superior long-run total returns vs both large and small caps.
  • Favourable balance between business maturity, balance-sheet strength and growth optionality.
  • High sensitivity to real economic growth, especially in post-tightening and early-cycle recoveries.
  • Current valuations vs mega-cap leaders provide potential catch-up room as breadth improves.

Role of VOE and IWP

ETF Style & Role Behavioural Profile
VOE Mid-cap value; cheaper, often cash-generative companies; tilts to cyclicals and financials. Lower valuation risk; more resilient in inflationary or higher-rate regimes.
IWP Mid-cap growth; higher earnings growth and reinvestment; more tech and innovation exposure. More sensitive to real rates, liquidity and risk appetite.

Strategic Objectives

  • Capture mid-cap equity risk premium with a diversified, low-cost implementation.
  • Exploit style cycles by tilting between value and growth rather than choosing a single style.
  • Use macro conditions (rates, inflation, growth, liquidity) as primary input into tilt decisions.
  • Maintain a simple, transparent rule set that can be interrogated and stress-tested by a model.

Macro-Driven Tilt Rules

Regime-sensitive

Style tilts are driven by observable macro variables rather than short-term price action. The model can interrogate or simulate these rules by adjusting macro inputs and reviewing the implied allocation.

Macro State (Jan 2026)

Indicator Previous Updated Classification
Inflation trend Moderating but uncertain Disinflationary Reweighted
Policy stance Restrictive / higher-for-longer Neutral to easing Reweighted
Real rates Elevated and rising Elevated but declining Reweighted
CPI YoY ~3.0% ~2.7% Reweighted
Policy rate direction Flat First cut delivered Reweighted

Demand Assumptions

Driver Previous Updated Classification
Growth demand sensitivity Favored growth-style tilt Demand broadening favors earnings durability and valuation discipline Reweighted
Growth leadership contribution Higher contribution to returns Reduced contribution to returns Reweighted
Value/cyclical demand contribution Lower contribution to returns Increased contribution to returns Reweighted

Supply Assumptions

Driver Previous Updated Classification
Equity supply Stable; no issuance-driven dilution risk assumed Unchanged Unchanged

Price Level Context

Metric Previous Updated Classification
Growth valuation premium Tolerated under falling inflation Constraining relative returns Rebased
Relative performance (Nov-Dec) Mid-Cap Value +2.5% approx. Mid-Cap Growth -3.0% to -4.0% approx. Rebased

Tilt Toward VOE (Value-Heavy)

  • Inflation is elevated or re-accelerating; policy bias is toward tightening or higher-for-longer.
  • Nominal and real yields are rising, or yield curve is steepening in a bear-flattening/steepening move.
  • Credit spreads are widening and market is favouring cash flows and balance-sheet strength.
  • Leadership in cyclicals, financials, energy and other value-linked sectors.
Higher inflation Rising real rates Wider credit spreads Value sector leadership

Tilt Toward IWP (Growth-Heavy)

  • Disinflation is progressing; inflation expectations are anchored or falling.
  • Policy rates are at or near peak; market prices a credible easing path, real yields stabilise or fall.
  • Liquidity conditions are improving; risk appetite broadens beyond mega caps.
  • Technology and other growth sectors exhibit sustained earnings upgrades and relative strength.
Disinflation Easing bias Liquidity improvement Growth sector leadership

Rebalancing & Profit-Taking Rules

  • Scheduled rebalance: at least annually back to chosen target weights.
  • Threshold rebalance: if either ETF drifts > 10 percentage points from target weight.
  • Profit capture: if one ETF appreciates > 25% over a short window, trim back to target and reallocate to the lagging ETF.
  • Extraordinary regimes: in extreme risk-off or recession scenarios, consider moving to maximum VOE tilt within bounds.

Strategy Updates (Jan 2026 Reassessment)

Change set: USMIDCAP_2025_11_REASSESS_V1

This update recalibrates macro interpretation and style bias while preserving the core thesis.

Section Previous Updated Classification
Macro state Moderating inflation, restrictive policy, rising real rates Disinflationary, neutral-to-easing policy, declining real rates Reweighted
Demand assumptions Growth-sensitive demand tilt Demand broadening; value-sensitive contribution up Reweighted
Supply assumptions Equity supply stable Unchanged Unchanged
Price level context Growth premium tolerated Growth premium constraining; value leadership Rebased
Scenario probabilities Base 50 / Favourable 30 / Adverse 20 Base 55 / Favourable 35 / Adverse 10 Reweighted
Portfolio structure Neutral 50/50; tilt range unchanged Target bias 55-60% VOE / 40-45% IWP Reweighted
Strategy phase Accumulation / Hold Accumulation / Hold Unchanged
Model instructions Growth tilt favored under disinflation and easing Require confirmation; extend leadership window to 2-3 months Updated

Specification Summary

Governance view

This tab provides a compact view aligned to the Investment Strategy Specification standard, referencing existing content where available and flagging items not yet explicitly defined on this page.

1. Strategy metadata

Field Definition Status
Strategy name Formal title used to identify the strategy and its version. Met
Asset / theme Primary asset class or thematic exposure targeted by the strategy. Met
Strategy type Classification of approach (core/tactical/relative value/thematic). Met
Primary objective Primary intent (growth, income, diversification, convexity, hedging). Not met
As-of date Date the assumptions and spot anchors are valid for. Met
Original baseline date Prior reference date used for change comparisons. Met
Review cadence Planned update frequency (monthly/quarterly/event-driven). Met

2. Investment universe & horizon

Field Definition Status
Eligible asset classes Allowed instruments (equities, ETFs, futures, options, physical). Part met
Geographic scope Regions or countries eligible for exposure. Met
Sector constraints Industry or sub-sector limitations for holdings. Not met
Instrument eligibility rules Liquidity, listing venue, currency, and leverage constraints. Not met
Strategic horizon Multi-year investment window for the core thesis. Met
Tactical horizon Shorter-term holding window for tactical sleeve. Not met
Expected holding period per sleeve Typical holding duration by sleeve. Not met

3. Core thesis & mispricing

Field Definition Status
Primary thesis statement Single statement explaining drivers, mispricing, and persistence. Part met
Structural drivers Named drivers with mechanism, duration, sensitivity, effects. Part met
Why mispricing persists Short-term noise and structural reasons for mispricing. Part met

4. Portfolio structure

Field Definition Status
Sleeve definitions Core and tactical sleeve roles and risk intent. Part met
Allocation bands Target ranges, hard limits, and breach conditions. Part met
Rebalancing rules Explicit triggers and frequency for rebalancing. Not met
Instrument roles Role, primary risk, correlation intent, and inclusion rationale. Part met

5. Deployment & execution framework

Field Definition Status
Entry strategy Rules for staged vs lump-sum entry and triggers. Part met
Scaling rules Explicit add/trim/pause/stop conditions. Not met
Exit strategy Structural exit signals and invalidation triggers. Part met

6. Scenario framework

Field Definition Status
Scenario definitions Macro, demand, supply, policy assumptions per scenario. Part met
Scenario probabilities Explicit weights with rationale and shift conditions. Part met
Price / valuation paths Spot anchor, range, terminal assumptions, path dependency. Part met

7. Return & risk assumptions

Field Definition Status
Return expectations Asset- and sleeve-level returns with probability weights. Part met
Volatility & drawdowns Ranges and peak-to-trough assumptions. Part met
Correlation assumptions Within-strategy and cross-asset correlations by regime. Not met

8. Risk framework

Field Definition Status
Key risks Risk name, transmission channel, affected assets, mitigation. Part met
Thesis invalidation Conditions to reduce, pause, or terminate strategy. Not met

8. Monitoring inputs

Field Definition Status
Quantitative signals Price levels, volatility, inventories, spreads. Part met
Fundamental indicators Demand growth, supply growth, capex cycle, pipelines. Part met
Event-driven triggers Policy, earnings, geopolitics, disruptions. Part met

9. Updates & versioning

Field Definition Status
Update log Record date, variable changed, old vs new, and reason. Part met
Re-baselining rules Explicit triggers for when to rebase assumptions. Not met

10. Model use & integration

Field Definition Status
Model consumption rules How models should treat assumptions and bands. Part met
Agent responsibilities Who monitors inputs and flags probability shifts. Not met
Integration context How this strategy plugs into portfolio and risk systems. Not met

11. Page structure & compliance

Field Definition Status
Tab structure Include Strategy, Strategy Updates, and Specification tabs. Met
Strategy updates table Present prior vs updated values with dates in headers. Met
Baseline-only updates When no prior version exists, label as Baseline (Month YYYY). Part met
Specification tab Include a compliance table aligned to the standard. Met
Spec reference comment HTML comment references the specification file path. Met

12. Style & formatting guide

Field Definition Status
Header hierarchy Title, descriptor, and metadata chips in a single header block. Met
Metadata chips Include as-of and baseline dates in the chip row. Met
Tab navigation Tabs styled consistently with active state and spacing. Met
Section cards Major sections appear in card containers with consistent padding. Met
Table styling Consistent header styling, row spacing, and full-width layout. Met
Scenario tables Scenario tables include clear Bear/Base/Bull headings. Met
Specification table Three-column compliance table (Field / Definition / Status). Met
Notes and captions Notes appear above/below tables in subdued text. Part met
Card grid layout Card grids support 2-3 cards per row with wrapping. Met
Scrollable tables Wide tables use a horizontal scroll wrapper. Part met
Typography Consistent heading and body text hierarchy. Met
Color accents Accent colors used sparingly for chips, tabs, headers. Met
Spacing Consistent vertical spacing between sections and tables. Met
Responsiveness Layout remains readable on tablet and mobile. Met
Tag color taxonomy Tags use a consistent color meaning across tables and cards. Met

13. Constraints & disclaimers

Field Definition Status
Leverage policy No implicit leverage unless explicitly stated. Part met
Forecasting disclaimer Assumptions are conditional and revisable. Met
Decision disclaimer Outputs inform decisions; they are not decisions. Met