Advisors Should Ask: Is My Investment Manager a Partner?

Posted by Dana Funds Investment Team on Aug 6, 2020 3:03:59 PM

The financial crisis was painful for anyone working on Wall Street, but the period gets credit for improving at least one industry dynamic: The bar for effective communication from an asset manager has been significantly raised.

As markets plummeted, advisors, consultants, investment committees and other key fund decision makers demanded dialogue from their portfolio managers about the market collapse and what they planned to do going forward. The demand for increased communication continues today, and is an industry trend we applaud.

Advisors and consultants deserve shared insight from their investment managers, and an open forum for communication. In short, they deserve true partnership. We believe boutique asset managers are best positioned to deliver the partnership clients deserve.

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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! 


Dana Investment Team 

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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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Pandemic Could Accelerate ESG Interest

Posted by Dana Funds Investment Team on Apr 30, 2020 11:40:07 AM

With fund inflows nearly quadrupling to a record $20.6 billion in 2019¹, ESG interest has clearly reached a tipping point … but the COVID-19 pandemic could be a catalyzing event that triggers even broader awareness this year.

As corporations grab positive and negative headlines for their response to the outbreak, we expect more consumers to take interest in companies’ treatment of their employees, customers and community, and invest accordingly.

The trend is already playing out in the first quarter, with ESG funds experiencing a record $10.5 billion in inflows … even as stocks crossed into bear market territory.²

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A Couple Tailwinds We Believe Are Poised to Blow in Active Managers’ Favor

Posted by Dana Funds Investment Team on Apr 24, 2020 10:23:41 AM

The arguments in favor and against active management are too long to tackle in a single blog post – and we won’t try to do so here. But as stocks find their footing after March’s downturn, we believe there are a couple important factors poised to work in active managers’ favor: size and quality. Both elements could be significant tailwinds for active managers in the months ahead, particularly when considering the composition and performance of indices heading into the slide.

In Current Environment, Quality Matters

Investment philosophies and styles vary, but many active managers – including Dana – emphasize “high quality” companies in the stock selection process. This means a preference for companies with stronger balance sheets, durable earnings streams and lower debt levels. Conversely, it means avoiding companies with high debt, and relatively low return on equity (ROE)* or return on assets (ROA)**.

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Are Small Caps Poised to Lead Again?

Posted by Dana Funds Investment Team on Apr 17, 2020 9:47:21 AM

While 2020 has been rough for all stocks, the pain has been most acute among small caps. As of April 15, the Russell 2000 Index was down -28.73% this year, a little more than twice the drop of the Russell 1000. While losses have been painful, we would encourage investors to stay patient; there is a strong case for small caps to take a market leadership position in the months ahead.

That case starts with relative valuations. Small caps have historically had higher valuations than large caps, but the valuation differential between the two groups is in the 21st percentile.¹ In plainer terms, that means the valuation disparity between small and large caps is this close less than a quarter of the time. Following these cheaper relative valuation extremes, small caps tend to recover.

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Five Stats to Keep Clients Invested Through a Volatile Market

Posted by Dana Funds Investment Team on Apr 9, 2020 1:43:07 PM

It’s a natural reaction to every bear market. As stocks plummet, clients start wondering whether they should pull money out of equities and wait on the sidelines until conditions improve. If you’re an advisor, you may have had several conversations along these lines recently. We salute your efforts to help clients stay the course.

At Dana, we realize the importance of staying fully invested and reflect it in our investment process, which dictates that funds hold minimal cash. Our view is that it is always better to stay fully invested because not even experts can perfectly time a rebound.

However, we know it can be challenging for advisors to keep their clients invested through a downturn. In the spirit of helping, below are five quick-reference stats and charts we’ve collected that paint a picture of why we believe it’s important to stay in equities through the entire market cycle:

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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.