Fundametrics® Large Cap Equity

3Q 2023 Performance Summary and Observations

  • The Fundametrics Large Cap Equity strategy outperformed the Russell 1000 Value Index by over 100 bps for the latest quarter.
  • The idea of higher interest rates for longer seems to be the new consensus for investors. The longer-term 10-year rate continued to rise throughout the quarter, starting at 3.8% and finishing at 4.6%. With interest rates, bank lending standards and the price of oil all becoming more restrictive to the economy, investors sold risk assets.
  • Higher interest rates and rising real yields hit high valuation and longer duration growth factors hardest while lower valuation and high dividend yield were at the top of the Fundametrics factor leaderboard for the quarter. The Fundametrics Alpha Composite performed well in this environment with Buy-ranked (deciles 1 – 3) stocks beating the sell-rated (deciles 8 – 10) by 400 bps.
  • The outperformance by high beta over low beta remains significant year-to-date at almost 1500 bps. As of the end of the quarter, the portfolio is overweight low beta stocks relative to high beta. High beta is generally overweight energy and consumer discretionary and low beta dominates healthcare, staples and utilities.
  • The valuation spread for Large Cap Value stocks vs. the Top 100 biggest companies remains wide.

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