Goldman Sachs Asset Management is adding a mid-cap US growth fund to its Luxembourg Sicav. The fund,...
Goldman Sachs Asset Management is adding a mid-cap US growth fund to its Luxembourg Sicav. The fund, run by Steve Barry and Ernie Segundo, invests in companies with a market cap between $1bn and $10bn and will attempt to outperform the S&P 400.
The fund is researched by the same 20-strong team that manages the group's large-cap US fund and $20bn of mid-cap money.
Andy Pyne, product manager growth equity strategy at Goldman Sachs, wants to provide investors with the opportunity for good diversification from the large caps that dominate the US market. As an example, he points out that the average market cap of the S&P 400 is $3.9bn, while the average of the S&P 500 is $99bn.
Valuations are better too, according to Pyne. The average P/E of the S&P 500 is 21.6 and the average growth forecast is 15.6%, while the S&P 400 has a 17.3 P/E average with a 17% growth forecast.
The US version of the fund was launched in May 1999 and is now worth $500m and Goldman has set a maximum capacity for the strategy at $4bn.
However, at the moment the total including managed accounts is $700m, so there is plenty of room for expansion.
The fund has a 9% tracking error to the S&P 400. It will usually have around 85-90 holdings, without too high a concentration in any one stock. It has one 3% holding but that is an unusually large position.
Pyne said: "If you look at the mid-cap space, a lot of the funds are run in a sectoral rotation manner. It was not uncommon for a fund to have 60p% tech in 1999, then they ran out of tech and went to healthcare or something. However, this product is not a technical or momentum in disguise."
The turnover is relatively brisk, at around 50`%, compared to 250% for the large-cap fund.
When analysing the stocks, the team looks at discounted cash flow analysis, but not at P/E so much. Instead, it will look at relative P/E or P/E to growth rate.
The US Growth Opportunities Portfolio team looks primarily at two types of mid-cap stock: traditional growth companies, which are medium-sized businesses with long-term growth prospects but which have not reached market dominance yet; and opportunistic growth, companies that are undergoing significant change.
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