On a pure return basis, the median domestic-equity separate account/collective trust lost 20.3% in the fourth quarter of 2008, which was a far cry from last quarter's average loss of "only" 8.9%, and 31.9% for the year, says Rachel Olson, an institutional analyst for Morningstar Inc. In a three-year period where every category on the Morningstar Style Box experienced losses, any positive returns were noteworthy.
In terms of asset flows, the categories on the Morningstar Style Box have taken a hard hit in the past year, she says. Strategies have lost between 23% and 29%, with Growth categories particularly out of favor, as investors have fled equities in favor of "safer" investments.
For Financial Advisor's semiannual ranking of the top separately managed accounts in nine categories, click here. Below Olson highlights some of the top-performing managers over the past three years:
Southfield All Cap
Southfield snagged the lead as the top-performing separate account strategy in the nine U.S. style boxes. With a three-year annualized return of 4.56%, it operates in the Mid-Cap Growth category and places strong emphasis on choosing high-quality companies with sustainable competitive advantages. Southfield is a "growth at a reasonable price" manager and holds a concentrated portfolio.
Columbus Circle Small-Cap Equity Growth
Columbus Circle manages this strategy with a long-term focus, considering securities due to macroeconomic and sector factors as well as company-specific factors. It usually holds around 70 securities and even invests a small portion (~7%) of its portfolio overseas, primarily in China, Germany, and Ireland.
Lord, Abbett & Co. Small to Mid Value
Legg Mason's management team utilizes both quantitative screens and bottom-up, fundamental analysis to identify securities that it feels are mispriced by the market. It fits into the Morningstar Mid-Cap Blend category as it tends to avoid the deeper value stocks.
Silvercrest Small Cap Value
Silvercrest's time horizon is approximately three to five years, so they are looking for solid companies with strong balance sheets. The management team combines top-down industry analysis with both quantitative and qualitative security evaluation, resulting in a portfolio that usually includes 50 or fewer stocks.
MFC Global US Large Cap Equity
MFC employs a proprietary valuation model to screen companies and then conducts a deeper, fundamental analysis of companies that pass initial screens. Management is not averse to sector or industry weightings and has not been shy to take stakes in financial stocks, including Charles Schwab Corporation and JP Morgan Chase, in recent periods.
Sadoff Growth
Sadoff's management team utilizes bottom-up country and industry allocation to construct a relatively concentrated portfolio, though no one stock is permitted to exceed 5% of the total portfolio's value. In recent periods, Sadoff Growth has held large stakes in cash as it attempts to weather the economic storm.
Gateway Investors Index/ RA (Risk Adjusted)
Gateway is in the Large Value category, but is unique because it hedges the portfolio by selling call options and buying put options. The sale of S&P 500 index call options provides cash flow, and the purchase of puts limits the portfolio's downside exposure-something that certainly came in handy in recent periods.