During the last decade we have experienced two of the most difficult periods in the history of the equity markets – the bursting of the technology bubble early in the decade and, more recently, the fallout from the financial crisis fueled by a credit-induced bubble. Throughout this whirlwind, we have maintained our investment philosophy of “Participate and Protect®)”; building a portfolio of companies that we deem to be the best managed and most financially sound firms we can find at attractive valuations.
In the wake of these trying years it is gratifying for Madison Investment Advisors to be recognized as a “Manager of the Decade” for our mid-cap equity strategy from PSN, a leading investment manager search and evaluation database. In their evaluation, our mid-cap equity strategy (as managed in our firm’s Mid-Cap Institutional Composite) ranked in the top ten managers among three of their peer group universes: the U.S. Core Equity Universe of 823 portfolios, the U.S. Equity Universe of 3,206 portfolios, and the Mid Cap Core Universe of 80 portfolios.1
See note below for more details on this award and the metrics behind it.2 Basically, PSN ranks managers on a combination of correlation (R-squared), performance, and risk (standard deviation). These are sophisticated measurements of a manager’s results and while some prefer to focus on short-term performance, we believe the best success comes from a process focused on long-term results. So even though we have had periods of underperformance over this 10 year period, in the aggregate we are pleased that our investment advice has garnered this Manager of the Decade recognition from a group that provides research to other investment professionals in the financial services industry.
Looking forward we continue to believe in the long-term results of our management approach. We are particularly optimistic about the prospects for the financially sound, high-quality companies we focus on. Historically, major rallies in lower-quality companies with suspect balance sheets, like that of 2009, have been followed by a rotation to companies that generate more consistent and predictable cash flow streams. Of course, past performance does not guarantee future results, but the uncertain path of our economy and recent market volatility underscore the importance of a risk-aware style such as ours.
The above information is presented as “supplemental information” included to the GIPS® compliant performance information accompanying this news story.
1. PSN does not track or rate mutual funds.
2. The PSN database is a recognized leader in providing separately managed account information. Presenting information on more than 2,000 managers, the database is designed to assist investment professionals in manager searches and evaluation. The PSN universes were created using information collected through the PSN investment manager questionnaire and use only gross of fee returns. Products considered for Manager of the Decade must have an R-Squared of 0.80 or greater relative to the style benchmark for a ten-year period ending December 31, 2009. Moreover, products must have returns greater than the style benchmark for the three latest rolling three-year periods. Products are then selected which have a standard deviation for the five-year period equal or less than the median standard deviation for the peer group. The information ratio is an efficiency measure calculated by dividing the Excess Rate of Return by the standard deviation of the Excess Rate of Return stream (tracking error). Madison Investment Advisors Inc. claims compliance with the Global Investment Performance Standards (GIPS®) as linked above. Past performance is not indicative of future results and there is a possibility of loss. |
