Asset Managers of the Year for Large-Cap Strategies

Dana Investment Advisors U.S. Large-Cap Core Strategy has "an incredibly consistent track record," having topped its benchmark in 14 out of the past 18 years, according to Envestnet | PMC analysts Mike Manning and Eric Halverson. Last year, its performance "bested the benchmark by over 6.5%," they point out.

The strategy team's "superior stock selection … overcame significant headwinds from a lower market capitalization tilt" tied to its sector-neutral and equal-weighting approach, Manning and Halverson say; the "reasonably concentrated" portfolio — which has 50-60 holdings and is sector neutral — is "driven by the dual approach of quantitative screening and fundamental research."

The Envestnet analysts add that Dana portfolio team relies on "valuation, quality and momentum inefficiencies and … three quantitative models to aggregate and rank every company in [its] universe."

The stellar results last year did catch some performance-watchers off guard, according to Duane Roberts, director of equities and portfolio manager of Waukesha, Wisconsin-based Dana. "We did have a very good year," he said. "And for some people it's a little bit surprising perhaps because we're known as a relative-value shop, and 2017 was very much a growth market."

While the Dana team likes growth and even seeks it out, "we just don't want to overpay for it," Roberts explained. This approach gives the portfolio "a consistent valuation tilt vs. our benchmark in all market environments, and … allows us to participate in growth markets as well as value markets."

The large-cap core strategy has outperformed in growth markets on a long-term cumulative basis, he says. "We just add more outperformance in value market."

Consistency is the group's priority. "We can't do anything to manage the ups and downs of the market, but we try to be consistent in our relative performance …," Roberts explained. "Part of that is by being consistent in our application of what we think is a very disciplined investment process that starts with portfolio construction."

The team aims to derive excess returns from its stock selection and "eliminates many of the other sources" for overperformance, he points out. The strategy also stays fully invested all the time. "Timing is something we avoid … and is impossible to do," the portfolio manager said.

"We don't make big kind of macro thematic bets in our portfolio. We're looking for the best individual securities in each segment of the market," he explained. As a result, "we tend to have parts of our portfolio that will be benefiting in almost any market environment."

This approach means the team is laser focused on "each individual security and … understanding the tradeoffs between growth and valuation in a way that [gives] us opportunities to perform [well] in almost any market environment," according Roberts. The strategy has had good consistency across sectors, he says, and over time: "We use the baseball analogy — we want to hit lots of singles and doubles, and we're not swinging for the fences with home runs."

What about changing market environments? "In most … we're going to perform reasonably well," Roberts said. Plus, the fully invested, sector-neutral approach is complemented to the attention paid by the portfolio team to the macro environment, "and valuation assessments do change with macro environment," he adds.

"In the short term, growth may continue to be the favorite part of the market," the portfolio manager said. "But we are deep into a heavy growth cycle in terms of market performance, and at some point the cycle always swings back."