As of August 31, 2020, markets continue to be dominated by a small subset of companies. These highly profitable tech companies have grown to mega-capitalizations through technological innovation, highly scalable business models, and strategic buyouts. History shows that these trends have eventually reversed themselves as their advantages wane either through competition,anti-trust intervention, or sector rotation. Cadence Capital believes investors do not get paid for concentration risk. Therefore, minimizing these risks is a benefit and may help avoid any unintended risks that can overwhelm a subset of stocks.
Following a similar pattern of growth versus value since 2016, markets have come to be dominated by numerous mega-cap companies. This trend shows up in indexes as a high concentration in Top Ten names, which have been commanded by growth companies (e.g. Apple, Microsoft, Facebook, Amazon, and Google). In addition, the pendulum swing toward indexed investing has provided an additional tailwind for these companies. History shows that these trends have eventually reversed themselves as their advantages wane either through competition, anti-trust intervention, or sector rotation.
At Cadence Capital, our normalized earnings yields are stationary with respect to underlying assumptions, so they are free from behavioral biases. As evidenced by the most recent normalized earnings valuation chart, value continues to look very attractive.
Growth’s relative outperformance since late 2016 is one of the many reasons Cadence Capital believes value strategies such as Dividend Yield or Equity Income continue to look attractive globally. This chart shows over 20 years of data where there has only been one other instance where the performance dispersion between growth and value has been this extreme.
As of 4/15/20, the concentration of the top 10 stock holdings of the Russell 1000 Index is at an all time high.
Even in these challenging times, income-producing securities continue to look attractive. At Cadence Capital, we focus on quality dividend companies that exhibit balance-sheet strength, profitability, and earnings stability. We believe quality dividend companies can ultimately maximize return potential, minimize volatility, and provide steady cash flow, even in down markets.
With the market turmoil that began in March of 2020 has come an increase in the cross-sectional dispersion of stock returns – bigger differences between the best and worst stock performers. In the past, periods of larger cross-sectional return dispersion have coincided with bigger factor performance spreads, meaning, potentially, more opportunities for factor-based investors.
Provides an overview on how income-producing securities continue to look attractive. Regardless of the political or market climate, Cadence Capital believes that there will always be premium-yielding equities that will deliver better risk-adjusted returns than most fixed-income options over a full market cycle.
Explores ultra-high yielding stocks and their performance relative to stocks with above-average yields and why investors may want to consider dividend-paying stocks as an option.
Analyzes the Russell 1000 Index to understand how "dividend cutters" versus "dividend raisers" fared during the Global Financial Crisis of '08 and '09.
Outlines the different approaches between composite model portfolios and multi-factor portfolios and details the potential benefits of each while exploring why we believe multi-factor is the better of the two options.
All about Factor-based Investing
Details how factor portfolios, even those classified within the same factor category, can vary widely due to underlying construction as well as the portfolio's approach to a particular factor.
September 15, 2020
Pacific Global Asset Management announced today the closing of Cadence Capital Management, its equity investment management affiliate. Cadence was acquired in 2016 for its specialized equity management expertise in the areas of actively-managed small-cap, factor-based, and impact investment strategies. Cadence's business and client base will be wound down in the fourth quarter of 2020.
Cadence’s investment strategies had solid long-term performance, unfortunately we were not able to grow the business to the scale necessary in a very competitive investment management market. We continue to focus on and build our Pacific Asset Management fixed income business and our Pacific Private Fund Advisors private equity business, while remaining open to opportunities to align with managers in other asset classes, so that Pacific Global remains positioned to meet investors’ evolving needs.
I would like to thank the Cadence team for their dedication, engagement and professionalism in managing the business for their clients and Pacific Life over the last four years.
CEO, Pacific Global Asset Management
MarketWatch, July 21, 2020
Cadence Capital’s CEO Michael Skillman, spoke with MarketWatch and discussed optimism around a potential vaccine and further economic stimulus. He noted that cyclical industries have seen the most damage from the coronavirus, and that it’s possible that we already have seen the bottom.
March 11, 2020
Cadence Capital’s CEO, Mike Skillman, appeared on Yahoo Finance’s “The First Trade” to give his thoughts on the importance of sticking to your long-term investment strategy and the attractiveness of dividend equity securities.
February 12, 2019
Pacific Global Asset Management announced the launch of Pacific Global US Equity Income ETF, a new actively-managed equity fund focused on income and capital appreciation.
November 15, 2018
Mike Skillman and Bob Fitzpatrick discuss the opportunity in smaller company stocks and their approach to investing in this inefficient space.
August 21, 2018
As large-cap U.S. stocks, as represented by the S&P 500 Index, have stalled this summer, some investors have rushed into smaller companies, which are benefiting from a tax cut and a strong domestic economy.
May 10, 2018
Cadence managers see the market environment tilting more their way - more in favor of small-cap stocks.
Morningstar, January 11, 2017
Pacific Life, our corporate parent, announced the re-branding of its asset management business as Pacific Global Asset Management, committed to investment results, transparency, and strategies that meet client needs.
Bloomberg News, April 26, 2016
Pacific Life purchases Cadence Capital, adding $4 billion in assets under management along with capabilities in strategic beta and growth equity investment management.