Why Investment Style Boxes Are Wrong Question to Ponder

Posted by Dana Funds Investment Team on Jul 16, 2020 4:39:39 PM

With growth stocks on a historical run of outperforming value, many allocators are wondering if mean reversion is due and are questioning their allocations to both style boxes. But growth or value may be the wrong question to ask.

As Dana portfolio managers explained in a recent Q&A on the ways active managers can differentiate their strategies, core strategies may provide optimal exposure. The Q&A also runs through a classic example of the perils of overpaying for growth, and touches on a less discussed benefit of core strategies: tax efficiency. As our portfolio managers explain:

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Amid ESG Fund Proliferation, Advisors Must Be Mindful of Fit

Posted by Dana Funds Investment Team on Jul 9, 2020 11:12:14 AM

ESG interest is growing and as asset flows follow, so too are the number of strategies dedicated to the space. For investment advisors, that makes the job of matching client objectives with the right strategy increasingly difficult.

In a recent Q&A session, Dana portfolio managers touched on the issue, and where their own ESG fund may – or may not – fit within a portfolio. A brief excerpt from the interview explains:

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Top 3 Blog Posts of 2020

Posted by Dana Funds Investment Team on Jun 30, 2020 2:28:42 PM

It’s hard to believe we are already halfway through 2020 – and what a ride it has been so far.

Our top three blogs for the year to date include insights on the fall into bear market territory, an almost equally quick rebound that seemed out of touch with economic reality, and an index that has more concentration risk than at any point over the last 30 years. These issues are still relevant today – give them a read and make some sense of the madness.

As always, we welcome your questions or comments. If you would like for us to cover a specific topic, we would love to hear from you. Just fill out the form on our contact us page and we will be in touch! 

Warmly,

Dana Investment Team 

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In 2020, ‘S’ and ‘G’ Become Bigger Part of ESG Focus

Posted by Dana Funds Investment Team on Jun 19, 2020 10:02:10 AM

Prior to 2020, the environmental aspect of ESG (Environmental, Social and Governance) investing has garnered the most attention from interested investors. But a global pandemic has thrust social and governance considerations into a larger spotlight. As an ESG manager, we applaud this change.

At Dana, we have always given equal attention to the environmental, social and governance issues that pose risks to a business. So do many seasoned ESG portfolio managers. While a company’s environmental footprint remains an important component of that analysis, we are glad to see more end investors realize that companies have an active role to play in other societal issues. The COVID-19 pandemic has laid bare some of the deeper issues that companies must address.

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A Sector’s Economic and Market Forecasts Are Rarely the Same

Posted by Dana Funds Investment Team on Jun 11, 2020 4:03:45 PM

In the recent downturn, there are few, if any, pockets of the economy that have suffered as much as the oil industry. Oil prices have collapsed since the start of the year, as supply builds up and a weakened economy saps global demand. U.S. companies have shut in wells, slashed investment, laid off workers, and in some cases, filed for bankruptcy. None of this, of course, is surprising to anyone reading the news … which is why underweighting the sector may not be as easy of a call as it seems.

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Style Boxes Pose Pitfalls in Post-Pandemic Investment Landscape

Posted by Dana Funds Investment Team on Jun 3, 2020 3:50:36 PM

Growth or value? It’s a question advisors and allocators ponder at every potential turning point in the market cycle. But as the world emerges from a pandemic-induced lockdown, the new investment environment may favor neither.

Instead, we believe heavy tilts toward either style box could punish investors in the coming quarters. Here’s the short case for why:

Scarcity of Growth Has Created a Crowding Effect Among Growth Stocks

So far this year, growth has outperformed value substantially. If the Russell 1000 Growth and Russell 1000 Value Index ended the year where they were at in mid-May, the growth index would have outperformed its value counterpart by the widest level in any year since 1999.¹

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Explaining the Disconnect Between Stocks and the Economy

Posted by Dana Funds Investment Team on May 27, 2020 4:34:57 PM

In recent conversations with clients, we are getting fewer questions about our economic outlook. Many of our clients are themselves business owners and have already felt the pandemic’s economic pinch firsthand. They don’t need investors to explain the fear gripping Main Street. What puzzles them is how the stock market could be so at odds with the economic gloom.

While entire industries are on the sideline during the pandemic and the unemployment rate continues to climb, stocks have recovered much (though not all) of March’s losses. So, what’s behind the rally that seems so out of sync? In short, we think the market is confident about the safety net the Fed and the government has provided. Given the size and scope of that safety net, markets are already looking ahead to when the quarantine ends.

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Top-Heavy & Troubling: S&P 500 Bears Extreme Concentration Risk

Posted by Dana Funds Investment Team on May 21, 2020 11:10:00 AM

The S&P 500 bears an extreme risk: too few stocks account for too much of its weight. The index is experiencing extreme concentration risk not seen in the last 30 years, with its five largest stocks now accounting for more than 20% of the entire index.

The chart below shows just how out of balance the weightings of the largest S&P 500 stocks have become. Currently, the total index weight of the five largest holdings is more than five standard deviations1 above normal.

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Health Care Sector Calls for Valuation Discipline

Posted by Dana Funds Investment Team on May 14, 2020 12:29:28 PM

Innovation within the biotechnology, medtech and diagnostics industries makes the health care sector an exciting area to invest. Valuations also make it precarious.

At Dana funds, we have balanced the risk and opportunity within the sector with a steadfast focus on valuation discipline. We are investing in innovation within the sector – but at what we believe is a reasonable price. We also find opportunity with companies that have simpler stories, but nevertheless benefit from long-term, secular tailwinds affecting health care.

Stocks within both camps have been large contributors to performance over the past year, and are a primary reason stock selection within the health care sector has contributed to relative performance for our Epiphany Fund.

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Clearing Up the ABCs of ESG

Posted by Dana Funds Investment Team on May 7, 2020 5:33:28 PM

While ESG interest is undoubtedly on the rise, the category hasn’t reached its full growth potential. One issue potentially holding it back? Clarity.

An October 2019 report from the Institute of International Finance1 found that financial firms are using nearly 80 different terms to describe various forms of sustainable investing. As the report describes, this is creating confusion for would-be investors:

“At best, this confusion makes it hard to compare investment products and for clients to understand the differences in offerings,” the report states. “At worst, it facilitates greenwashing—intentionally misleading investors or giving them a false impression about how well their investments are aligned with their sustainability goals.”

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The Dana Funds are distributed by Ultimus Fund Distributors, LLC. There is no affiliation between Ultimus Fund Distributors, LLC. and the firms referenced in this blog post.