The London Company SMID Managed Account Strategy is thewinner of the Asset Manager Awardin the SMID category thanks to itsstrong 2019 performance; it was selectedfrom more than 100 small cap separateaccounts and more than 500 small capmutual funds on the Envestnet platform.
As Envestnet analysts explain, the
London Company SMID team — manag-
ing $1.1 billion — does “an outstanding
job of adding value for shareholders as
demonstrated by the strategy’s impres-
sive long-term performance metrics.”
Brian Campbell has served as the
strategy’s portfolio manager for the past
decade, sharing lead duties for the last
year and a half with company co-found-
er Stephen Goddard.
Calling 2019 a “very strong year forus,” Campbell said, “We don’t expect tooutperform when the markets are up asmuch as they were. It’s a reflection ofreally good decision-making” over thepast five years that “allowed us to do sowell” last year.
The London Company strategy “outperformed the benchmark (Russell 2500Index) by nearly 650 basis points in 2019( 32.24% vs. 27.77%), and ranked in thetop decile of the Morningstar Mid-CapBlend managed account peer group universe,” according to Envestnet.
“Our outperformance was driven bystock selection,” Campbell explained.“Our allocation was a drag in 2019, aswe were underweight” in the healthcareand technology sectors. Still, the teamwas “able to offset that with strong stockselection,” which was “broad-based,” hesaid. Of its 30 positions, 17 were up over30% last year, such as those in the industrials, materials and staples sectors.
Year to date in 2020, “We’re perform-
ing just as expected,” the portfolio man-
ager explained. “Our focus is preserving
capital when times get tough and cap-
turing a lot less of the downside risk.” In
the first quarter, the markets took a “big
move south, [but] we did really well,”
he said. “If you look at the year-to-date
numbers, we’re right now down about
6% or so vs. 10% for the benchmark.”
Thus, the strategy is ahead by roughly
350 basis points. “Our goal is to capture
about 80% of the downside and 90-95%
of the upside, which is pretty much
what’s happened so far in 2020,” he said.
The team has an “inherent belief that
the markets are less efficient at assess-
ing risk than reward,” Campbell said.
“We spend the majority of our time ana-
lyzing what can go wrong in each deci-
sion we make. We don’t build feature models and try to outguess every other analyst
and PM on growth rates and margin expansions.
“We spend a lot of time looking at companies’ ability to earn good spreads on the
capital they invest, so we focus on high-return-on-capital companies. We go through
a pretty stringent checklist trying to find potential potholes and red flags,” he said.
“And our team has been very adept [at] avoiding mistakes in a meaningful way.”
Though the team, of course, doesn’t know exactly what will the next 12-18 months
hold for the economy given the ongoing COVID- 19 pandemic and related issues, “We
are very long-term focused,” Campbell explained. “We’re looking for businesses to
own for three to five or perhaps 10 years or longer.”
Furthermore, the team’s decisions are based on fundamentals. “We try not to speculate
too much on market factors. That said, we would expect continued volatility,” he noted.
“There’s been a tremendous amount of stimulus funneled into the economy. Peopleare forecasting much stronger second-half results than first-half results, and we’ll haveto wait and see what comes to fruition,” the portfolio manager added. — Jeff Berman
Small/Mid Cap Asset Manager of the Year
The London Company
SMID Managed Account Strategy
“We spend the majority ofour time trying to analyzewhat can go wrong in eachdecision we make. Wedon’t build feature modelsand try to outguess everyother analyst and PM outthere on growth rates andmargin expansions.”
Years with present firm: 10
Title: Co-Lead Portfolio Manager
Years in financial services: 20
Investment/asset class focus:
Asset Management Firm:
The London Company
Year firm was founded: 1994
Number of employees and/or
partners: 41 employees and
AUM/advisement as of Dec. 31, 2019: