SMID Cap Select Strategy

  • Overview

    Overview

    The Eagle SMID Cap Select team seeks long-term capital appreciation while reducing volatility in the small and mid-cap space. The team believes consideration of environmental, social and governance (“ESG”) issues is an integral part of our proven process and enhances our ability to optimize long-term returns while minimizing risk.

    Investment Process1

    The team constructs portfolios that consist of durable franchises - stable, but growing, companies with the following attributes:

    • Defensible business models with differentiated products and services
    • Strong free cash-flow generation
    • High returns on capital
    • Strong balance sheets
    • Stability
    • Management teams that think and act for the long-term interests of all constituents
     
    Establish and build positions when short-term investors fail to recognize the value of durable franchises. The team implements a high conviction approach, investing in 25-35 of their best ideas.

    Create a Constant Competition for Capital:

    • Focus List of companies reviewed regularly alongside current portfolio
    •  
     

    ESG Integration

    Environmental, social, and governance considerations are embedded in the investment process. Due to the lack of available public data in the small- to mid-cap space, the team actively engages with company management, both through meetings and voting proxies, to understand how ESG issues impact the business and also to effect change when necessary.

    Result

    This disciplined investment strategy is designed to reduce the volatility inherent in the small- and mid-cap space. Over a full market cycle, the team would expect the portfolio to outperform the benchmark Russell 2500® Index with less risk and volatility.

    1Not every investment opportunity will meet all of the stringent investment criteria mentioned to the same degree. Trade-offs must be made, which is where experience and judgment play a key role. Accounts are invested at the discretion of the portfolio management team and may take up to 60 days to become fully invested.

    Portfolio Characteristics

    Typical Market Capitalization

    Within the market cap range
    of the Russell 2500® Index
    at the time of purchase.

    Benchmark

    Russell 2500® Index

    Account Minimum

    $100,000

    Typical Turnover

    Typically less than 50%

    Typical Number of Holdings

    25 to 35

    Index Definition
    Indices are unmanaged, and one cannot invest directly in an index.

    The Russell 2500® Index is made up of the 2,500 smallest companies in the Russell 3000® Index, representing approximately 17 percent of the Russell 3000 total market capitalization. The Index figures do not reflect any deduction for fees, expenses, trading costs or taxes.

    Frank Russell Company (“Russell”) is the source and owner of the trademarks, service marks and copyrights related to the Russell Indexes. Russell® is a trademark of Frank Russell Company. Neither Russell nor its licensors accept any liability for any errors or omissions in the Russell Indexes and / or Russell ratings or underlying data and no party may rely on any Russell Indexes and / or Russell ratings and / or underlying data contained in this communication. No further distribution of Russell Data is permitted without Russell’s express written consent. Russell does not promote, sponsor or endorse the content of this communication.

  • ESG Considerations

    ESG Considerations

    Environmental, social, and governance considerations are an important part of the investment process. We believe these issues can have a meaningful impact on long-term performance and risk mitigation.

    • Companies with durable franchises are likely to outperform over the long-term
    • Short-term investors often fail to recognize the resiliency of such franchises
    • Process discipline and diversification ensures consistency of results
    • Investors and companies maximize value creation with a long-term perspective
     
    Sustainable Business Models

    Unique approaches to addressing stakeholder needs drives differentiation

    • Employee engagement and development
    • Diversity improves decision making
    • Community engagement builds loyalty
    • Environmental stewardship improves sustainability and opportunity

    Management with long-term strategy can take advantage of short-term challenges


    Source: In depth discussions with management and stakeholder

    ESG to Identify Risk

    Governance

    • Poor management and misaligned incentives
    • Poor capital allocation
    • Risk of fraud

    Social

    • Loss of talent and work stoppages
    • Risk of group think

    Environmental

    • Near term operational risk
    • Long-term threats to business model

    Source: Bloomberg, ISS ESG, Company Disclosure & SASBI

     

    Corporate Engagement

    Our investment team is committed to working with its portfolio companies to drive long-term value creation by encouraging actions that improve sustainability of the business, increase transparency, and balance capital allocation to maximize returns for all stakeholders.

    Active Owners
    • Long-term holders that understand all aspects of their business
    • Balance capital allocation across shareholder, returns, internal investment and mergers and acquisition to drive sustainably higher returns
    • Active and ongoing discussions with management teams to improve sustainability
      • Setting long-term objectives
      • Reducing pay gap and increasing diversity
      • Improve environmental track record
      • Dissolution of dual share classes
    • Encourage management to improve disclosure, including disclosure of environment and social data
    Proxy Voting

    We support shareholder resolutions that protect and/or enhance:

    • Shareholder rights
    • Improve corporate accountability
    • Increase transparency
    • Support diversity
    • Board independence
    • Protect the environment
    • Uphold human rights
    • Promote responsible business practices
     

    There is no guarantee that the investment goals/objectives will be met.

  • Investment Team

    SMID Cap Select Strategy Investment Team

    Jason Wulff

    Jason Wulff, CFA

    Portfolio Co-Manager

    21 Years Of Industry Experience

    7 Years With Eagle Asset Management

    Matthew McGeary

    Matthew McGeary, CFA

    Portfolio Co-Manager

    23 Years Of Industry Experience

    10 Years With Eagle Asset Management

    Betsy Pecor

    Betsy Pecor, CFA

    Portfolio Co-Manager

    25 Years of Industry Experience

    10 Years With Eagle Asset Management

    Matt Spitznagle

    Matthew Spitznagle, CFA

    Portfolio Co-Manager

    26 Years of Industry Experience

    10 Years With Eagle Asset Management

    E.G. Woods, CFA

    E.G. Woods, CFA

    Portfolio Co-Manager

    24 Years Of Industry Experience

    2 Year With Eagle Asset Management

    Crystal Wamble, CFA

    Crystal Wamble, CFA

    Client Portfolio Manager

    10 Years Of Industry Experience

    9 Years With Eagle Asset Management

  • Performance

    Performance1 as of Dec. 31, 2021

        Current
    Quarter
    Year
    to Date
    One
    Year
    Three
    Year
    Since Inception
    (May 31, 2018)

    Eagle SMID Cap Select Strategy

    Gross

    5.38% 29.23% 29.23% 28.66% 20.09%

    Eagle SMID Cap Select Strategy

    Net

    5.32% 28.89% 28.89% 27.09% 18.24%

    Russell 2500® Index

      3.82% 18.18% 18.18% 21.91% 13.16%

    Calendar Year Returns1

        2021 2020 2019
    Eagle SMID Cap Select Strategy Gross 29.23% 24.29% 32.59%
    Eagle SMID Cap Select Strategy Net 28.89% 23.53% 28.92%

    Russell 2500® Index

      18.18% 19.99% 27.77%

     

    Compounded, Annualized Rates of Return Net of Fees as of Dec. 31, 2021

    Year Percentage $100,000 Compounded

    1

    28.89%

    $128,880

    3

    27.09% $205,250

    5

    11.55% $172,769

    10

    10.03% $260,135

    Since Inception (May 31, 2018)

    18.24% $182,466

    Risk Information
    Risks Associated with Small/Mid Cap Investing Investing in small and mid-sized companies is based on the premise that small and mid-sized companies will increase their earnings and grow into larger, more valuable companies. However, as with all equity investing, there is the risk that a company will not achieve its expected earnings results, or that an unexpected change in the market or within the company will occur, both of which may adversely affect investment results. Historically, small amd mid-cap stocks have experienced greater volatility than larger equity asset classes, and they may be less liquid than larger-cap stocks. Thus, relative to larger, more liquid stocks, investing in small and mid-cap stocks involves potentially greater volatility and risk. The biggest risk of equity investing is that returns can fluctuate and investors can lose money.

    The investment strategy will include only holdings deemed consistent with the applicable Environmental Social Governance (ESG) guidelines. As a result, the universe of investments available to the strategy will be more limited than strategies not applying such guidelines, which may cause it to perform differently than similar funds that do not have such a policy.

    Thus, relative to larger, more liquid stocks, investing in small-cap stocks involves potentially greater volatility and risk. The biggest risk of equity investing is that returns can fluctuate and investors can lose money.

    Not every investment opportunity will meet all of the stringent investment criteria mentioned to the same degree. Trade-offs must be made, which is where experience and judgment play a key role. Accounts are invested at the discretion of the portfolio manager and may take up to 60 days to become fully invested. Past performance does not guarantee or indicate future results.

    Disclosures
    (1) Past performance does not guarantee or indicate future results. No inference should be drawn by present or prospective clients that managed accounts will achieve similar performance in the future. Investment in a portfolio, investment manager or security should not be based on past performance alone. Because accounts are individually managed, returns for separate accounts may be higher or lower than the average performance stated. Individual portfolio/performance results may vary due to market conditions, trading costs and certain other factors, which may be unique to each account. There is no guarantee that these investment strategies will work under all market conditions, and each investor should evaluate their ability to invest for the long term, especially during periods of downturn in the market. Investing in equities may result in a loss of capital. Investing involves risk and you may incur a profit or a loss. Investment returns and principal value will fluctuate so that an investor’s portfolio, when redeemed, may be worth more or less than their original cost. Diversification does not ensure a profit or guarantee against a loss.

    The calculation of the performance data includes reinvestment of all income and gains and is depicted on a time-weighted and size-weighted average for the entire period. Calculations include reinvestment of all income and gains. Gross performance presented is "pure gross" and is shown before deduction of any fees. Net returns have been reduced by the entire bundled/wrap fee. The bundled/wrap fee will typically include trading, investment management, portfolio monitoring and other administrative fees charged by the sponsor. Eagle's fees are set forth in Eagle's ADV, Part II. Over a period of five years, an advisory fee of 1% could reduce the total value of a client's portfolio by 5% or more.

    GIPS® is a registered trademark of CFA Institute. CFA Institute does not endorse or promote this organization, nor does it warrant the accuracy or quality of the content contained herein. Eagle Asset Management, Inc. has received a firm-wide verification for the periods January 1, 1982 through December 31, 2020. Performance data for the current year may be revised, and Eagle will publish any revised performance data. Eagle believes that the performance shown is reasonably representative of its management style and is sufficiently relevant for consideration by a potential or existing client. Verification assesses whether (1) the firm has complied with all the composite construction requirements of the GIPS standards on a firm-wide basis and (2) the firm’s policies and procedures are designed to calculate and present performance in compliance with the GIPS standards. The verification and performance examination reports are available upon request.

    Eagle Asset Management, Inc. is an investment adviser registered with the Securities and Exchange Commission and is engaged in providing discretionary management services to client accounts. The benchmark is the Russell 2500™ Index, which has been derived from published sources and has not been examined by independent accountants. 

    Currency: all monetary amounts displayed on this website are in U.S. dollars.

    To obtain a compliant presentation and/or the firm's list of composite descriptions, please contact Eagle Asset Management at 1.800.237.3101.

    Index Definition
    Indices are unmanaged, and one cannot invest directly in an index.

    The Russell 2500® Index measures the performance of the small to midcap segment of the US equity universe, commonly referred to as “smid” cap. The Russell 2500® Index is a subset of the Russell 3000® Index. It includes approximately 2500 of the smallest securities based on a combination of their market cap and current index membership. The Russell 2500® Index is constructed to provide a comprehensive and unbiased barometer for the small to mid-cap segment. The index is completely reconstituted annually to ensure larger stocks do not distort the performance and characteristics of the true small to mid-cap opportunity set. The Index figures do not reflect any deduction for fees, expenses, trading costs or taxes.

    Frank Russell Company (“Russell”) is the source and owner of the trademarks, service marks and copyrights related to the Russell Indexes. Russell® is a trademark of Frank Russell Company. Neither Russell nor its licensors accept any liability for any errors or omissions in the Russell Indexes and / or Russell ratings or underlying data and no party may rely on any Russell Indexes and / or Russell ratings and / or underlying data contained in this communication. No further distribution of Russell Data is permitted without Russell’s express written consent. Russell does not promote, sponsor or endorse the content of this communication.

  • Literature

    Documents available for download



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