Generally, balanced funds stick to a relatively fixed proportion of stocks and bonds but may also ha...
Oak Ridge: Small Cap Fund Eyes Quality & Catalysts
10/01/2018 5:00 am EST
Oak Ridge Dynamic Small Cap I (ORSIX) — launched in September 2015 — seeks to capitalize on inefficiencies in the small capitalization market that result from investor behavioral biases, via a systemic and repeatable process, explains mutual fund specialist Walter Frank, editor of MoneyLetter.
The fund splits its holdings into three sleeves, with all stock holdings risk-adjusted to determine the ideal position size. The first sleeve in the investment selection process is the “relative value model.”
Here, the team of managers from sub-advisor Algert Global looks for companies that appear mispriced relative to their peers. They combine historical and forecast fundamentals with asset-based metrics to find mispriced companies.
In the second portion of the portfolio, the “quality model,” the team seeks companies likely to sustain robust operating performance.
In the final segment, the “catalyst model,” the managers search out firms with changing sentiment and levels of investor attention. In this portion, they aim to differentiate between stocks in the early and late states of sentiment cycles. Combined, the three models provide diversification within the fund portfolio.
In total, the fund holds about 100 stocks, with 86% of assets in small-caps and the reminder in mid-caps. It is fairly well diversified with respect to sectors and individual holdings. Industrials recently were the largest overweight relative to the benchmark Russell 2000 Index, followed by technology, with financials and consumer discretionary being underweight.
While the fund’s very top holdings have not been knock-out performers this year, each of its number seven through fifteen place stocks (ranging from 2.3% of assets to 2.0%) have been outstanding, with advances of near 50% or better.
Oak Ridge Dynamic Small Cap I has outpaced 98% of the Morningstar small blend fund category this year, with a near 19% advance through the end of August. The fund available at Schwab, Fidelity, and TD Ameritrade for a retail purchase.
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