The fund seeks capital appreciation in the long term and current income by investing in small-size companies in the United States.
The fund manages assets with the help of six complementary sub-advisers namely Brandywine Global Investment Management, LLC, Hotchkis and Wiley Capital Management, LLC, Mellon Investments Corporation, Barrow, Hanley, Mewhinney & Strauss, LLC, Foundry Partners, LLC, and Hillcrest Asset Management, LLC.
The fund prefers a multi-manager investing approach with the aim of reducing volatility and downside risk.
The sub-advisers’ investment process starts with a list of companies in the benchmark index and the research team utilizes quantitative techniques and fundamental analysis to identify investment opportunities.
Next, the research team invests in companies that demonstrate above-average earnings growth potential, free cash flow yields and return on capital, as well as below-average valuation multiples on the basis of earnings, book value, and revenue.
In addition, the team also considers a company’s tangible assets, sustainability of its cash flows, capital intensity and financial leverage.
The team prefers companies that are estimated to trade below their fair values.
Then the manager constructs a portfolio of stocks from a list of companies favored by the research team and allocates capital based on its conviction level.
The portfolio is well diversified at the security, industry and stock levels, and may have significant exposure to the financials sector.
The fund may invest cash balances in other investment companies, including money market funds.
Also, the fund may lend its securities to broker-dealers and other institutions to earn additional income.