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October 06, 2004 at 08:00 PM
Sept. 30, 2004 — Along with boosting net returns, the management team of Goldman Sachs CORE Tax Managed Equity/A (GCTAX) believes its tax-efficient strategy can lessen the effects of market volatility. The fund’s statistics suggest it has met these goals.
Goldman Sachs CORE Tax Managed Equity has never paid a capital gains distribution, and its volatility, as measured by standard deviation, is lower than its peers, 15.49 versus 18.24 for the average large-cap blend fund. Standard & Poor’s ranks the fund’s three-year risk rank as moderately low compared with the average domestic equity fund.
Donald Mulvihill, the fund’s lead manager and head of Goldman Sachs’ tax-efficient equity strategies, traces the fund’s success to its generally quantitative approach. The fund’s team frequently tests and adjusts its quantitative models. The models’ criteria include valuations, earnings quality, profitability, management impact, and momentum. Rather than large bets, the fund generally has small overweightings and underweightings relative to its benchmark, the Russell 3000 index.
Mulvihill said the fund’s screen for companies buying back company stock has been particularly helpful in uncovering stocks likely to outperform. The fund’s screen for analysts’ earnings upgrades has also aided returns, he said.
The quantitative approach has been successful. For the one-year period through last month, Goldman Sachs CORE Tax Managed Equity rose 15.7%, compared with an 11.5% gain for the average large-cap blend fund. The fund has also outpaced its peers over the longer term. For the three-year period through August, the fund rose 2.5%, on average, versus a 0.4% decline for its peers. It carries a rank of 5 Stars from Standard & Poor’s.
The portfolio is constructed to reflect the investment styles, sectors, and market capitalizations of the Russell 3000 Index. That index was selected as the benchmark since it includes large-, mid-, and small-cap stocks, and has a relatively low turnover. Currently, 76.5% of the fund’s holdings are large-cap stocks, and 14.1% are mid-cap and small-cap stocks.
