Title: Senior Portfolio Manager and co-team leader for the Special Global Equity team
Years with present firm: 16
Years in financial services: 16
Investment/asset class focus: Mid Cap
Asset Management Firm: Wells Fargo Asset Management
Firm’s headquarters: San Francisco
Year firm was founded: 2012 (includes Keystone Investments, formed in 1932)
Number of employees and/or partners: 1,440-plus team members
AUM/advisement as of Dec. 31, 2019: $509 billion
The Wells Fargo Asset Management Special Mid Cap Value strategy beat out about 200 other candidates to win a 2020 Asset Manager Award for its stellar performance in 2019 and for several ways its portfolio team consistently drives results in the mid-cap category.
As Envestnet analysts explain, the US Special Mid Cap Value team — which operates as a boutique asset manager within the larger Wells Fargo organization — achieved a “strong and competitive 2019 performance” that highlighted its “ability to outperform during a period when the market took off and they faced an overall stylistic headwind.”
Bryant VanCronkhite, senior portfolio manager and co-team leader for the Special Global Equity team, chalked up his team’s 2019 results to three factors.
First and foremost is its “strong focus on stocks that meet our balance sheet-driven process,” said VanCronkhite, who has been lead portfolio manager on the Mid Cap strategy since 2009. (Earlier, he was with Strong Capital Management, which Wells Fargo acquired in 2004.)
“Our process is unique in that we focus on companies that control their own destiny by using their balance sheets in a productive manner,” he explained.
“As a result, we’re not dependent on market backdrops to drive our success.”
The second key to its success is that the team creates the portfolio “to mitigate non-stock-specific impacts, and we do that by partnering with our risk management team to build a portfolio not only with the right level of risk, but the right types of risk,” said the portfolio manager.
The third key factor — and one that “I basically preach every day” — is the importance of “avoiding stock blowups,” he said. “Half the battle in our business is avoiding making big mistakes.”
Of course, he added, “We’re going to make small mistakes. But if we can keep the mistakes small and avoid the big ones, we’ll have a year that is in line with our benchmark and all the rest will be upside” from its stock selection.
A whopping 95% of the strategy’s outperformance in 2019 was “driven through stock selection rather than sector allocation, which is what we like to see with active managers,” according to Envestnet analysts.
Overall, mid caps were up 30.5% in 2019, and value trailed growth for the year (27.0% vs. 35.5%). But the Wells Fargo strategy was up 36.6%, besting the Russell Mid Cap Value Index by 9.6%.
The fund’s performance, meanwhile, ranked in the second percentile of the Morningstar Mid Cap Value separate account universe (which includes 173 strategies).
“As far as 2020 is concerned, we’re beating the benchmark by a little bit” through May, VanCronkhite said. “We’re beating peers by a little more. It’s been a very macro-driven year for us so far, with obviously the coronavirus” being a challenge.
As the economy started to reopen, the team went looking to “build a portfolio that is basically agnostic to that kind of event, and we did that,” the portfolio manager said.
The team was “very active” in adjusting its portfolio in Q1 of 2020 as the market pulled back, he notes. It’s been tweaking the portfolio by moving capital to where it sees “favorable reward-risk ratios” and to firms in sectors such as healthcare and consumer discretionary.
Since March 31, though, “We’ve been far less active, letting our stocks play out, and we’ve been very happy with the results so far,” VanCronkhite said. Looking ahead, the portfolio should face “headwinds or tailwinds from the broader economy,” and “no company is immune to that,” he added. — Jeff Berman