Portfolio Manager since 2004
Small Cap Value
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YTD Return
Return is shown net of fees. See performance below for additional disclosure.
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Total Assets
Profile
The Cambiar Small Cap Value portfolio is a diversified strategy that invests primarily in small-cap companies domiciled in the U.S. This equal-weight portfolio will hold between 45-55 stocks with a starting universe that includes any company with a market cap between $500 million to $5 billion.
Key Facts
- Inception Date
- 11/30/2004
- Minimum
- $5 MM
Portfolio Managers
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Portfolio Manager since 2017
Performance
Inception Date: 11.30.2004. The performance information depicted above represents Cambiar’s Small Cap Value Composite (Institutional). Returns are presented gross (g) and net (n) of management fees. Gross and net returns are reduced by transaction expenses. Net returns are also reduced by actual investment advisory fees and other expenses that may be incurred in the management of the account. Prior to 2014, the gross returns reflect accounts with both gross and “pure” gross performance. From 2014 to present, the composite contains accounts with only gross performance. “Pure” gross returns, applicable to separately managed accounts that are part of broker-affiliated or broker-sponsored programs, including wrap programs, that waive commission costs or bundle fees including commissions (SMA), are not reduced by any expenses, which includes transaction costs, and are provided as supplemental information. Net returns for SMAs are calculated by subtracting actual SMA fees reported by the SMA sponsor. Net of fees performance reflects a blended fee schedule of all accounts within the Small Cap Value Composite (Institutional). SMAs might also incur bundled fees that are charged by brokerage firms which sponsor SMA fee programs and that may include transaction costs, investment management, portfolio monitoring, consulting services, and in some cases, custodial service fees. Cambiar clients and mutual fund investors may incur actual fee rates that are greater or less than the rate reflected in this performance summary. Results are reported in U.S. dollars.
Performance results for the Small Cap Value Composite (Institutional) are evaluated against the Russell 2000® Value Index. The Russell 2000 Value Index is a float-adjusted, market capitalization-weighted index comprised of firms in the Russell 2000® Index that experience lower price-to-book ratios and lower forecasted growth values. The Russell 2000 Index is a float-adjusted, market capitalization-weighted index that measures the performance of the 2,000 smallest companies in the Russell 3000® Index, which consists of 3,000 of the largest U.S. equities. The index assumes no management, custody, transaction or other expenses. The Russell 2000 Value Index is a broadly based index that reflects the overall market performance and Cambiar’s returns may not be correlated to the index. The index is unmanaged and one cannot invest directly in an index. Cambiar’s performance and the performance of the Russell 2000 Value Index include the reinvestment of all income. Performance is preliminary; please contact us for finalized figures. As with any investments, there are risks to be considered. Past performance is no indication of future results.
Performance presented is intended for institutional client use only. For more information, please access our GIPS Reports here.
Composition
Top 10 holdings
Sector Weights (%)
Attributes
RISK STATISTICS
Active Share
Disclosures
Data is provided for a representative account as of March 31, 2021. Portfolio holdings, characteristics, country breakdown, and sector weightings change over time and may differ between clients based upon their investment objectives, financial situations and risk tolerances. Cambiar makes no warranty, either express or implied, that the weightings shown will be used to manage your account. The securities presented do not represent all of the securities purchased, sold, or recommended by Cambiar and the reader should not assume that investments in the securities identified were or will be profitable. The information provided on the page should not be considered a recommendation to buy or a solicitation to purchase or sell any particular security. There can be no assurance that an investor will earn a profit or not lose money. There can be no assurance that the portfolio will continue to hold the same position in companies described herein, and the portfolio may change any portfolio position at any time. As with any investments, there are risks to be considered. Past performance is no indication of future results.
The one year forecast is included for illustrative purposes and accordingly, no assumptions or comparisons should be made based upon these ratios. Risk statistics are based off a five-year time frame. Portfolio characteristics are based upon third-party sources that are deemed to be reliable, however, Cambiar does not guarantee its accuracy or completeness.
Total Assets represents assets under management for the strategy and are subject to change. Minimums represent intended/proposed minimums for institutional clients and are subject to change.
The Russell 2000® Value Index is a trademark/service mark of the Frank Russell Company. Russell® is a trademark of the Frank Russell Company.
Definitions:
Active Share – a holdings-based measure of active management representing the percentage of securities in a portfolio that differ from those in the benchmark index.
Price/Earnings (F1Y) – a calculation that divides the current share price by the estimates of earnings in the next four quarters.
Debt/Equity – Long Term is a calculation that takes interest-bearing, long-term debt divided by shareholder equity.
EPS Growth – Long Term is a calculation that takes the company’s estimated profits for five years divided by the outstanding shares.
Alpha – a measure of risk-adjusted performance.
Beta – a measure of risk in relation to the market or benchmark.
R-Squared – a measure of how closely a portfolio’s performance correlates with the performance of a benchmark index
Sharpe Ratio – a direct measure of reward-to-risk and is calculated by subtracting the risk-free rate from the rate of return for a portfolio and dividing the result by the standard deviation.
Standard Deviation – a statistical measure of historical volatility; a measure of the extent to which numbers are spread around their average.
Commentary
Domestic Markets – 1Q21 Review
U.S. equity markets posted a positive start to 2021, with the S&P 500 Index breaching the 4,000 level for the first time on its way to a 6.2% return for the first quarter. The market action had a more frenetic tone in the small cap space, where the Russell 2000 Index ended the quarter with a 12.7% return. Explosive growth in retail accounts and a skew towards high risk/high reward trades resulted in wide swings across a number of smaller cap companies. The market’s optimism towards small caps looks like a crowded trade at this point, as the small-cap index has now gained 95% over the past twelve months – one of the largest one-year returns on record.
On a style basis, the rotation from growth to value continued in the quarter. The improved sentiment towards old economy sectors such as Financials, Energy and Industrials is largely based on the market’s expectation for a sharp earnings recovery as the economy strengthens in the coming quarters. Banks and related financials received an additional tailwind in the form of a steepening yield curve, which conversely weighed on growth stocks. Just as an uptick in rates is more damaging to long-duration bonds, rising rates are negative for long-duration growth stocks, whose cash flows are typically further out in the future.
Inflation and Steepening Yields – False Dawn or Beginning of a Trend?
One supporting catalyst for the gain in equities over the past ten years has been the ‘TINA’ backdrop; i.e., ‘there is no alternative’ to stocks. In response to the low yield environment that has been in place since the 2008-09 financial crisis, investors have moved out on the risk curve in the pursuit of higher returns – from money market instruments and bonds into public equities and alternative assets. Given the year-to-date move in the U.S. 10-Year Treasury from 0.9% to the 1.70% level, is this TINA relationship poised to change? While still low in absolute terms, fixed income is beginning to offer an investment alternative to stocks, particularly in light of the lower equity return assumptions that many strategists are forecasting.
The big question over the next 12-24 months is how will central banks (and markets) respond should we get an inflationary bulge resulting from pent-up demand, immense liquidity, supply chain challenges and other fundamental changes in the economy? Historically, the Federal Reserve used interest rates as a governor in an attempt to keep the economy from overheating. Yet the Fed appears comfortable staying pat on rates in the event of an upward pressure on prices, stating that the resulting effect on inflation will be ‘neither particularly large nor persistent’. Given the recently announced $2 trillion infrastructure initiative coming on the heels of a $1.9 trillion fiscal stimulus plan, the path of least resistance for yields is almost certainly higher. That said, the pace of the advance will be key; i.e., the markets can likely digest a slow and steady move higher in yields, while a rapid steepening in yields would almost certainly trigger a more volatile response in equities. If necessary, the Fed could mimic Japan and Australia by taking more explicit action to control yields in the form of yield curve control. That said, deploying such an unconventional tactic with equity markets at all-time highs may be difficult to justify. The bigger takeaway is that inflation expectations are rising for the right reason – growth expectations are improving, and interest rates (the dependent variable) are also rising as conditions improve.
As opposed to making inflation and interest rate forecasts, the more relevant considerations in Cambiar’s analysis are the potential impacts to our companies’ margin/earnings outlooks should cost pressures arise. One industry that is experiencing shortages in raw materials is semiconductors. This is a notable development; unlike ketchup (another key shortage for consumers of this condiment), semis are an increasingly essential component to a range of end markets. The current bottleneck is affecting production of PCs, gaming consoles, smartphones, and cars – at a time where demand is surging. The increase in lead times will likely lead to higher prices for consumers, as well as missed revenue opportunities at the corporate level. Cambiar continues to focus on companies that possess a defensible margin structure (vs. competing on price), and can offset potential increases in materials or labor costs via pricing power and/or continued productivity improvements.
Certain information contained in this communication constitutes “forward-looking statements”, which are based on Cambiar’s beliefs, as well as certain assumptions concerning future events, using information currently available to Cambiar. Due to market risk and uncertainties, actual events, results or performance may differ materially from that reflected or contemplated in such forward-looking statements. The information provided is not intended to be, and should not be construed as, investment, legal or tax advice. Nothing contained herein should be construed as a recommendation or endorsement to buy or sell any security, investment or portfolio allocation. Securities highlighted or discussed have been selected to illustrate Cambiar’s investment approach and/or market outlook. The portfolios are actively managed and securities discussed may or may not be held in client portfolios at any given time, do not represent all of the securities purchased, sold, or recommended by Cambiar, and the reader should not assume that investments in the securities identified and discussed were or will be profitable.
Any characteristics included are for illustrative purposes and accordingly, no assumptions or comparisons should be made based upon these ratios. Statistics/charts are based upon third-party sources that are deemed reliable; however, Cambiar does not guarantee its accuracy or completeness. As with any investments, there are risks to be considered. Past performance is no indication of future results. All material is provided for informational purposes only and there is no guarantee that any opinions expressed herein will be valid beyond the date of this communication.