U.S. Small Cap

At Chartwell, we believe you can locate value not only in traditional sectors, but also in unexpected corners of the market, where managers rarely venture. Rather than restrict ourselves to investing in only traditional core stocks, we broadly diversify and invest in undervalued growth and value companies wherever they can be found.

Chartwell’s Small Core portfolio is an actively managed blend of 50 to 70 Small Growth and Small Value stocks. The portfolio is well diversified across all economic sectors and we will actively adjust the portfolio to a growth or value bias based on our fundamental analysis of where we see the best opportunities. The objective of the portfolio is to beat the Russell 2000 index over the long term and provide lower risk scores versus our peer groups.

The Small Cap Core portfolio incorporates the best ideas of Chartwell’s Small Cap Growth and Small Cap Value portfolios.  Each of the 12 investment professionals concentrate on specific sectors within each segment of the small cap investment arena.  As changes are made in each portfolio, the Small Cap Core portfolio manager then determines how the Small Cap Core portfolio should change.  Active discussions between the manager and each member of both teams help determine effective additions and deletions from the Small Cap Core portfolio as well as the proper position size and trading activity.  A small portion of the portfolio may also be in stocks not held in either Small Cap Growth or Small Cap Value at the manager’s discretion.

Our investment process integrates the efforts of several kinds of specialists: quantitative analysts, fundamental analysts and a Portfolio Management Team. Our quantitative process results in a universe of securities that are statistically inexpensive verses the market (Russell 2000) or which demonstrate superior growth relative to their economic sector. On the value side we look for companies priced at the lower end of their historical valuation measures. On the growth side we look for companies with secular, sustainable growth and a sound economic foundation. With value stocks, the decisive element of our research process is an appraisal of the company’s fundamental value, separating those with real value from those that are merely inexpensive on statistical basis. Our growth research process separates those companies with long-term secular growth potential from those that are only short-term performers with high valuation metrics. The final portfolio is constructed as a bottom up residual of stock selection. Quantitative analysis helps to monitor the balance between the two segments. Joint portfolio manager input sets sector exposures, the mix of growth and value and weights individual securities. We employ constraints on sector weights and individual position limits to manage risk.

During the fundamental research process, we generate approximately 80% in house and rely on external sources for about 20%. Wall Street sources and direct company contacts provide critical information for the investment decisions. Each company held in a portfolio must be contacted every month (usually by phone). In addition, each company's management team must be visited in person at least once a year (including company visits or industry seminars, etc.). The purpose is to detect any change in the company's fundamental outlook at an early stage so that appropriate action can be taken before it becomes consensus on Wall Street. Other research sources include talking with competitors, trade sources, and Wall Street analysts.

*5 year relative to the Russell 2000 Index
Statistics as of 12/31/15