A fresh approach in an era of active decline

The structural shift from active to passive management refuses to slow down. In 2024 alone, the global share of active assets under management in mutual funds and ETFs fell from 65% to 61%, as passive strategies recorded $1.6 trillion in net inflows, in contrast to over $100 billion of active outflows*.

This has further intensified the competition for capital among active portfolio managers who are also now grappling with the potential consequences of “Liberation Day”. The response has been a reallocation of capital, particularly into sectors linked to infrastructure, defence and long-term industrial trends. However, more generally, the search for viable, attractively priced options has driven a renewed focus on small and mid-caps, especially in Europe.

The liquidity conundrum for SMID caps

Yet, the opportunity this creates is compromised for many small and mid-cap listed companies by the same structural issue: liquidity. Limited trading volumes make it difficult for institutional investors, especially non-domestic ones, to build or exit positions efficiently. This deters initial interest, even when fundamentals are sound.

Management teams often express frustration at this dynamic. Their natural inclination is to seek more investor meetings, pressing their IR teams and advisors to secure roadshows and increase access. When these efforts fall flat due to limited broker coverage or lack of specific investment triggers, this leads to disillusionment.

There is no universal fix, but there is a better way to approach the problem. Understanding the sequence of capital markets visibility is key to breaking the cycle.

Sequentially improving liquidity: Story, execution, engagement

In practice, engagement without a compelling and credible equity story rarely delivers results. In low-liquidity environments, unless there is a clear catalyst or event, there is little to pull investors in.

The starting point should always be the story: a clear, well-articulated narrative that explains why the business matters, how it is positioned and where long-term value can be created. When this is combined with consistent operational and financial delivery — quarter after quarter — this often results in organic capital markets progress. Valuation begins to respond, the stock crosses market capitalisation thresholds that trigger both active and passive investor screening tools and new conversations open up with institutions that had previously stayed away. Improved liquidity, greater visibility and upward ratings revisions tend to follow — and a virtuous circle is in motion.

Staying the course: Progress through process

This is not complex financial engineering, but it does require rigour. Preparing for earnings releases, defining the strategic narrative behind the numbers and clearly demonstrating operational momentum, even ahead of financial impact, can all be powerful tools. There may still be only a small number of participants on calls or broker coverage may remain limited, but even a handful of well-placed investors and analysts can play a key role in amplifying a strong story as long as the story is credible and consistently reinforced.

Well-prepared investor materials, clear articulation of KPIs and a structured communications roadmap all serve to strengthen the narrative. Many of today’s successful SMIDs were once micro-caps that simply focused, delivered and stayed the course. The message is simple: behave like the stock you want to become and the market will eventually take notice.

Low-effort, high-impact levers

Building visibility and credibility in the market does not always require large-scale investor campaigns. For small and mid-cap companies, there are several practical and often underutilised tactics that can help improve positioning and attract incremental interest:

  • informal briefings with broker sales teams, particularly those active in your sector or regional peer group. As well as an effective and efficient way to familiarise them with your equity story, these sessions serve as a useful gauge of investor appetite as sales teams begin to introduce the stock to institutional clients.
  • Fireside chats with a small number of investors. These more conversational formats are easier to arrange than a traditional roadshow and tend to generate interest from investors who would otherwise not commit to a formal meeting.
  • Securing coverage from dedicated small and mid-cap research houses. This does not necessarily mean sponsored research. Several established research firms and brokers in Europe are actively expanding their focus into the mid-, small- and micro-cap space. Identifying the right partners can also create opportunities to participate in curated investor conferences.
  • Engaging with private wealth managers, family offices or selective retail channels. This can be particularly useful when the business model is straightforward and the value proposition is clear, albeit this is dependent on factors such as free float, shareholder structure and existing liquidity.
  • In some jurisdictions, regulated liquidity contracts can support trading volumes and investor confidence. While not a substitute for underlying demand, they remain a valid and useful tool to boost baseline support during quieter periods.
  • Connecting with peers can also be a valuable tactic. Many small and mid-cap companies face similar challenges, and there is benefit in exchanging experiences, whether through regional investor relations societies or informal networks. Looking at how similar companies are approaching access, liquidity or disclosure can provide actionable insight and inspiration.

Liquidity generation is a deliberate process, not a miracle

There is no magic formula for creating liquidity or attracting capital as a small or mid-cap. But neither is there an inevitability to invisibility. What is required is a structured approach — anchored in strong fundamentals, communicated clearly and supported by consistent execution.

Visibility in the capital markets is not won overnight. It is earned step by step with the right materials, the right plan and a clear view of where your equity story fits in the wider market narrative.

*Data taken from BCG’s 2025 Asset Management Report