For clients interested in investing in our U.S. equity strategies in smaller amounts, we offer two mutual funds based on the same investment strategies that we provide our institutional clients: The Disciplined Equity Fund and the Small Cap Opportunity Fund.
The Disciplined Equity Fund is a domestic large cap mutual fund sub-advised by our subsidiary, Advanced Investment Partners (AIP). The Fund seeks to outperform the S&P 500® Index over time through superior stock selection while maintaining risk characteristics that are similar to the benchmark.
The Small Cap Opportunity Fund seeks to outperform the Russell 2000® Index over market cycles. The portfolio consists of securities the manager believes are undervalued in the marketplace in relation to factors such as cash flow, free earnings, growth potential, asset value, or in relation to securities of other companies in the same industry. The investment management process is based on fundamental bottom-up security analysis while using portfolio construction analytics to monitor and manage risk.
Our Disciplined Equity Fund applies a “bottom up” systematic process, whereby the Management Team evaluates a broad universe of stocks using three independent analyses, each of which is designed to provide a distinct valuation perspective:
Broad Universe Analysis: Evaluates each stock relative to all other stocks in the large cap universe using financial and technical factors.
Style-Specific Analysis: Segregates the S&P 500 Index into four style and market cap groups and evaluates each stock relative to its peers using a customized model which includes financial and technical factors specific to each style and market cap combination.
Sector-Specific Analysis: Divides the universe into 11 economic sectors and evaluates each stock relative to its sector peers using financial and technical factors.
These three analyses are combined to generate an excess return expectation for each stock. This expectation is used to rank all stocks from best to worst and only those in the top 20% are considered for purchase.
The Small Cap team focuses on rigorous fundamental analysis and employs a disciplined valuation approach to select securities for inclusion in its portfolio. A universe of potential investments is initially identified through a series of proprietary screens. After initial analysis, we construct a multi-year free cash flow model for each stock considered for investment to derive an estimate of the stock’s fair value. Portfolios are built by owning those stocks with the highest expected rates of return over the investment time horizon, and methodically replacing those in the portfolio having relatively low expected rates of return with well-researched ideas having higher expected rates of return.
We utilize a number of proprietary tools to measure, monitor and manage portfolio risk. We believe that Risk Management begins at the security level, and that our analytical approach provides a substantial “margin of safety” that helps in protecting capital during market dislocations.
We provide objective investment management to our clients while making their needs our highest priority. We are particularly proud of the long-term stability of our client base and their success. View our professionals to meet the people behind Great Lakes Advisors.