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April 25, 2013 at 09:36 AM
This is the ninth year that Investment Advisor, AdvisorOne and Prima Capital, now Envestnet | Prima, will have researched, nominated and chosen the best separately managed account managers in multiple categories.
Below, we name those strategies, in alphabetical order, chosen as finalists by the 2013 SMA Managers of the Year Awards Committee in the small-, mid- and SMID-cap U.S. equity category. This year, the winners of the SMA Managers of the Year honors in this category and the others will be celebrated at a live event in Chicago, in online interviews posted to AdvisorOne and in the cover story of the June issue of Investment Advisor. (See our 2013 SMA Managers of the Year home page for more information on the process, the finalists and, on and after May 1, the winners of this year’s awards.)
Nominee 1: EARNEST Partners Mid-Cap Core
The first nominee in this category is EARNEST Partners, led by founder, partner and CEO Paul Viera (left) and its Mid-Cap Core strategy. The first step in the Atlanta-based firm’s investment process “is to screen the relevant universe to identify stocks that are likely to outperform based on their financial characteristics and the current environment,” Envestnet | Prima’s analysts wrote in recommending this product. “Using a proprietary approach, the investment team identifies the financial and market characteristics that have been in place when an individual company has produced outstanding performance in the past. These characteristics include valuation measures, market trends, operating trends, growth measures, profitability measures and macroeconomics.”
The approximately 150 best companies identified in the screening process are put through a second review. The final step in the investment process is to construct a portfolio that includes those stocks expected to have the best performance and that effectively manage risk. The team uses downside deviation to measure and then constrain the likelihood of significantly underperforming the benchmark. This “risk budget” is based on financial characteristics, sector weightings and market capitalizations.
Nominee 2: Glenmede Investment Management Small-Cap Equity
Glenmede’s Small-Cap Equity product is the second nominee in this category. The Philadelphia-based Glenmede Trust Co. subsidiary begins its investment process by screening a universe of 3,500 stocks using a multi-factor model to rank them into eight economic sectors, according to Envestnet | Prima’s analysts.
“The model is based 45% on valuation factors, 25% on growth/profitability factors, 20% on earnings catalysts and 10% on market confirmation (relative price momentum),” according to the written recommendation on Glenmede by Prima’s analysts. They continue by reporting that “valuation factors include P/E, EV/EBITDA, P/B and net cash percentage to market cap. Growth/profitability factors include ROA, ROE, growth rate and three-year sales growth/three-year EPS growth. For earnings catalysts, the firm uses earnings and sales surprises as well as earnings estimate revisions.”
Riverbridge Partners’ SMID-Cap Growth product rounds out the nominees in this category. Led by cofounder and chief investment officer Mark Thompson (left), the Minneapolis-based firm’s investment process begins by identifying and investing in companies that meet all aspects of the investment criteria. This initial universe is narrowed down through fundamental research. 