April 29, 2004 — For investors looking for an all-in-one equity fund, SunAmerica Mutual Funds is offering SunAmerica Focused Equity Strategy/A (FESAX), a ‘fund of funds’ investing in domestic and international equity portfolios.
The product is suitable for “a relatively uninitiated” investor, or an intermediary looking for asset allocation assistance, says Steve Schoepke, a vice president of research and product development at SunAmerica. Schoepke oversees asset allocation and subadvisor selection for Focused Equity Strategy.
With Focused Equity Strategy, SunAmerica takes the concept of a fund of funds a step further since each underlying portfolio is run by three different outside subadvisors. These include Janus Capital, Dreman Value Management, Marsico Capital Management, and Wellington Management, among others.
Launched in November 2002, the $426.8-million offering has made a solid debut. For the one-year period through March, the portfolio gained 43.5%, while the S&P 500-stock index rose 35.1%. To date, the portfolio shows moderate volatility relative to the broad market based on one-year standard deviation. Focus Equity Strategy is too new to be ranked by Standard & Poor’s.
Typical of a fund of funds, overall expenses for the SunAmerica offering are higher than those for the average domestic equity fund. The fund’s Class A shares carry a 1.94% combined annual expense ratio, which includes a 0.61% fee for asset allocation. In contrast, the average large-cap blend fund carries a 1.14% expense ratio.
Looking for a “low correlation of excess returns,” Schoepke and his team pick three outside subadvisors for each of the five portfolios within Focused Equity Strategy. When considering subadvisors, Schoepke says he and his team look at about 50 factors. “We don’t want managers who do well in the same market cycle,” Schoepke says.
Within the underlying portfolios of this offering, SunAmerica seeks subadvisors of varying investment approaches. For example in SunAmerica Focused Lrg Cap Grth/A (SSFAX), Schoepke says Fred Alger Management is the most aggressive subadvisor, Marsico Capital Management is “next in line,” and Salomon Brothers Asset Management is “the most benign.”
Each subadvisor contributes a maximum of ten holdings to their respective portfolio. Aiming for “alpha fundamental stock selection,” Schoepke says the fund managers generally avoid sector investment strategies. Asset allocation for Focused Equity Strategy is designed to mirror the overall market based on the Russell 3000-stock index.
Each quarter, SunAmerica reviews the weightings of the underlying portfolios. Last quarter, the weighting for Focused Large-Cap Growth was lowered to 32% from 33%, and the weighting for Focused 2000 Value was boosted to 17% from 16%
|SunAmerica Focused Equity Strategy Fund — Underlying Portfolios|
|SunAmerica Focused Lrg Cap Grth/A (SSFAX)||32%|| Marsico Capital Management
Salomon Brothers Asset Management
Fred Alger Management
|SunAmerica Focused Lrg Cap Val/A (SSLAX)||29%|| Dreman Value Management
|SunAmerica Focused 2000 Val/A (SSSAX)||17%|| Janus Capital Group
Boston Partners Asset Management
Hotchkis Wiley Capital Management
|SunAmerica Focused 2000 Grth/A (NSKAX)||12%|| Baron Capital Management
Oberweiss Asset Management
Deutsche Asset Management
|SunAmerica Focused International Equity/A (SFINX)||10%|| Harris Associates
MFS Investments Management
The Boston Company Asset Management