Performance Review 2006
Annual Commentary: US Equity - 2006
Performance Review 2007
Annual Review: US Equity – 2007
Performance Review 2008
Annual Review: US Equity – 2008
Performance Review 2009
Annual Review: US Equity – 2009
Performance 2010 - Year to Date
Quarterly Review: US Equity Strategy – First Quarter 2010
Quarterly Review: US Equity Strategy – Second Quarter 2010
Performance since 2006
Process and Strategy – How does the Fund Managerteam invest?
Goldman Sachs Asset Management: "Investment Philosophy
As part of GSAM Fundamental Equity, we believe that specialized, focused teams who are committed to an investment philosophy and operate in an environment of accountability, create the best opportunities for potential alpha generation. We also believe that we can leverage our world-class style-specific strategies to create a portfolio with US broad market exposure without the permanent bias associated with a single-style strategy.
The US Equity Investment Committee, comprised of senior members from the GSAM Fundamental Equity Growth and Value Teams, uses a bottom-up approach to construct a US large cap portfolio of thoroughly researched companies that exhibit quality characteristics and compelling valuations.
Investment Style
The GSAM US Equity Strategy is a large cap core portfolio comprised of companies trading at attractive valuations with favorable growth characteristics. We believe that combining ideas from a growth and value approach while maintaining a balance between the two styles provides US, broad-market exposure without the permanent bias associated with a single-style strategy.
Investment Process
Our investment process begins with sourcing portfolio names from the GSAM Fundamental Equity Growth and Value Teams. Steve Becker (Portfolio Manager, Growth Team) and John Arege (Portfolio Manager, Value Team) are embedded portfolio managers on their respective research teams and also members of the Investment Committee. Steve and John draw upon the research of their teams and each recommends 40-50 high conviction ideas that are contributed to the portfolio. After combining the best ideas from the GSAM Growth and Value Teams, the Investment Committee evaluates the overlap in stocks, sector bets and style characteristics and manages portfolio risk relative to the S&P 500 benchmark.
Research Process
In order to fully leverage the depth and breadth of our investment resources, every idea recommended for the portfolio must have been thoroughly vetted through the disciplined investment process of either the GSAM Fundamental Equity Growth or Value Teams and sometimes both. The research teams are each organized by industry, with each investment professional responsible for knowing his/her sector in tremendous depth. Potential investment ideas are typically generated through brainstorming during investment team meetings, inherent industry expertise of our Research Analysts, and discussions with other companies. Company and management visits form a critical part of the on-going research effort. We believe extensive contact with senior management is a prerequisite for any investment. Meetings with operating managers are usually conducted over several sessions and include an in-depth discussion of the company’s operations, financial performance, and business strategy. In addition, our portfolio managers and analysts interview potential investments’ competitors, customers, and suppliers.
Our fundamental research process involves thorough balance sheet and income statement analysis and cash flow projections. This step enables the team to calculate an estimate of the economic or intrinsic value of the company and establish a reasonable valuation at which to buy the stock. The teams approach this challenge from different perspectives. The Growth Team first attempts to identify companies that meet their criteria for a high-quality growth investment. Companies should have some, if not all, of the following characteristics: dominant market share, established brand name, pricing power, predictable and sustainable growth, enduring competitive advantages, favorable demographic trends and excellent management. Finally, the Growth Team hopes to purchase these companies at attractive valuations. In contrast, the Value Team’s philosophy is based on the belief that all successful investing should thoughtfully weigh two important attributes of a stock: price and prospects. The Team uses industry-specific, cash flow-oriented valuation metrics to assess potential investments within each industry group. The Team emphasizes the prospects of a business as well as price in order to avoid cheaply-priced but deteriorating companies.
Decision-making process/buy discipline
The Investment Committee, comprised of Eileen Rominger (CIO GSAM), John Arege (Portfolio Manager Value Team) and Steve Becker (Portfolio Manager Growth Team), is accountable for construction of the final portfolio. The Investment Committee evaluates the portfolio, ensures that active weights accurately reflect current research opinions, manages risk relative to the S&P 500 Index, maintains a style balance and monitors portfolio characteristics. The result is a carefully constructed diversified large capitalization portfolio of 70-100 names providing US broad market exposure without the permanent bias associated with a single-style strategy."
Investment Outlook
Goldman Sachs Asset Management: "We maintain a cautiously optimistic outlook on the US recovery, though we recognize that the path to an economic recovery may occur at an uneven pace. We believe that many of the market headwinds have already been discounted and that the risk/reward opportunity in equities is attractive. Amidst a challenging macroeconomic environment, we are excited to find ourselves with ample opportunities to buy high quality businesses at attractive valuations.
As we consider equity returns going forward, we believe stock prices will be driven by company-specific fundamentals, specifically free cash flow and margin structure. In our view, the dramatic cost cutting that occurred in 2009 should provide certain companies with significant operating leverage.
Our research efforts continue to be focused on companies that can grow revenue by gaining market share and determining whether the cost cutting was sustainable or transient. We believe that it will continue to be a stock-picker’s market and an investment manager’s ability to identity and purchase those companies best poised for earnings and free cash flow growth will be an important component of investor returns."
