U.S. stock selection fund beats all odds
BG, Opalesque Geneva:
The objective of the active manager is to outperform the overall market. Not all did so in 2020 when the S&P 500 ended the year up over 18%.
2020 has been tumultuous for the financial markets. The torrent of liquidity lowered interest rates and pushed up asset prices almost everywhere investors looked. According to the S&P Dow Jones SPIVA® US Scorecard, a semi-annual research series that compares fund managers active in the United States against their benchmarks, the positive market performance has largely translated into good absolute returns for investors. active fund managers. But while the turmoil and disruption caused by the pandemic should have provided plenty of opportunities to outperform, 60% of large-cap equity funds have lagged the S&P 500. 45% of small-cap funds have underperformed. outperformed the S&P SmallCap 600. And nearly 51% of mid cap funds underperformed the S&P MidCap 400.
The main active management strategy is security selection. A US-based investment firm that selects stocks, Pinnacle Associates, was among the best benchmarks in 2020. Pinnacle Associates International Small Cap, LP returned + 37%, according to documentation seen by Opalesque. PIPEs (private investment in public capital) then contributed a quarter of the performance. The fund was up 65% (gross) since August 31, 2021. It has annualized 9% since February 2000 and in the first quarter of 2019, the strategy ranked among the top ten players in its universe.
It is managed by Randy Baron, who has 25 years of investment experience and joined Pinnacle in 2012 and is responsible for all of the company’s global strategies. He is also responsible for its turnaround strategy, which subscribes to the thesis that high quality companies sometimes fall temporarily out of favor. In the second quarter of 2020, it was ranked the world’s No. 1 manager among international small-cap funds.
Baron will participate in the Small Managers BIG ALPHA Episode 4 webinar on October 21.
Pinnacle Associates was founded in 1984 and is an employee-owned RIA with approximately $ 7.6 billion in assets under management. The company has traditionally focused on fundamental and bottom-up stock selection, with particular emphasis on the small / mid-cap space. He does not short, hedge and does not use derivatives.
The International Small Cap strategy exemplifies these principles, as the management team identifies potential investments in publicly traded stocks anywhere in the world with an initial market capitalization of less than $ 5 billion.
“We are trying to identify companies or industries that have the potential to be disruptors and establish market dominance in their respective fields,” Pinnacle director John D. Black told Opalesque. “The team searches for potential investment ideas through a wide range of media and industry contacts, then spends a lot of time (over months or years) learning about corporate finances and most importantly again, with the management team. ”
Managers believe they invest so much effort up front to find companies with superior financial standing, a talented and ethical management team and some kind of “catalyst” to fuel future growth that they the long-term risk of significant capital degradation is negligible; while the potential for exponential returns is significant.
While this approach can lead to short-term volatility, Pinnacle is a long-term investor with a typical 3 to 5 year holding period and, since they know the benchmarks but are not constrained, they are willing to accept short-term volatility in exchange for long-term growth.
“As we search for ideas around the world,” he adds, “we tend to focus on countries / geographies that offer strong financial accounting standards as well as a cultural background that allows us to familiarize ourselves with the risk profile of any potential investment (for example, we are significantly underweight in Asia due to the difficulty of obtaining GAAP-compliant financial statements in many of these markets, as well than the inaccessibility of company management). ”
A stock pick is when an analyst or investor uses some form of systematic analysis to conclude that a particular stock will make a good investment and, therefore, should be added to their portfolio. This is also called active management. The position can be long or short and will depend on the outlook of the analyst or investor for the stock price in question.
Small Managers – BIG ALPHA Episode 4
When: Thursday, October 21 at 10:30 a.m.ET
Free registration: www.opalesque.com/webinar/
With larger amounts of capital pursuing the same Alpha strategies and continuing to erode the Alpha, savvy investors are turning to smaller and / or emerging managers as they seek other sources of return.
We are proud to present Episode 4 of this groundbreaking webinar series featuring the following carefully selected panel of investment managers:
– Heeten Dosch, Doshi Capital Management
– Craig Reeves, Prestige Fund
– Randy Baron, Pinnacle Associates
– Andreas Schweitzer, Arjan Capital