Important information on Voya Small Cap Growth Trust Fund

Transcription

1 Important information on Small Cap Growth Trust Fund The information provided on the following pages has been provided by Investment. Neither TIAA nor its affiliates has independently verified the accuracy or completeness of this information. This material is for informational or educational purposes only and does not constitute a recommendation or investment advice in connection with a distribution, transfer or rollover, a purchase or sale of securities or other investment property, or the management of securities or other investments, including the development of an investment strategy or retention of an investment manager or advisor. This material does not take into account any specific objectives or circumstances of any particular investor, or suggest any specific course of action. Investment decisions should be made in consultation with an investor s personal advisor based on the investor s own objectives and circumstances. Investment, insurance and annuity products are not FDIC-insured, are not bank guaranteed, are not deposits, are not insured by any federal government agency, are not a condition to any banking service or activity and may lose value. TIAA-CREF Individual & Institutional Services, LLC, Teachers Personal Investors Services, Inc., and Nuveen Securities, LLC, Members FINRA and SIPC, distribute securities products. 17 Teachers Insurance and Annuity Association of America-College Retirement Equities Fund, New York, NY A14567 C8

2 2Q 18 Small Cap Growth Trust Fund - Class 2 Strategy-At-A-Glance Fund Description Share Class Inception Date Benchmark 1-year Turnover Ending 6/3/18 Annual Expense Ratio (%)* Annual Expense Ratio per $1,* The Small Cap Growth Trust Fund - Class 2 is a collective investment trust fund maintained by Investment Trust Co., available to eligible qualified retirement plan clients. Designed exclusively for qualified retirement plans and their participants, the fund is not available to individual retail investors. 1/2/ % $ There is no guarantee that this objective will be achieved. *The annual expense ratio includes both the investment management fee as well as the portfolio's operating expenses. Strategy Overview The Small Cap Growth strategy seeks to outperform its benchmark over a full market cycle via an actively managed approach relying on fundamental research and analysis to identify highquality companies with strong balance-sheet and cash-flow characteristics for sustainable growth trends. Investment Philosophy We believe consistent and durable alpha is best achieved over the long-term via a sectorneutral, research-centric investment process driven by a diverse team of career sector analysts Our key beliefs: Bottom-up stock selection is the key driver of alpha Specialized sector and industry experience are crucial to value-added fundamental research Positive cash-flow generation and deployment drive earnings per share, and ultimately stock prices Investment Process Our disciplined, bottom-up investment process focuses on high-conviction stock selection. The process begins by identifying companies within the Russell 25 Growth Index, plus opportunities outside of the index with similar market capitalizations to that of the index. Next, a quantitative evaluation ranks the investment universe and focuses the analysts attention on the most attractive stocks within each sector. The analysts conduct fundamental research to identify companies with solid balance sheets and strong cash flow generation capabilities. Portfolio construction is based on the attractiveness of each stock, given benchmark weight, expected return, perceived risk, and liquidity. Universe Definition and Screening Portfolio Construction and Analysis Understanding the Macroeconomic Environment Buy/Sell Decisions Fundamental and Financial Analysis Follow the Cash Flow Not FDIC Insured May Lose Value No Bank Guarantee INVESTMENT MAGEMENT Reliable Partner Reliable Investing

3 Small Cap Growth Trust Fund - Class 2 2Q 18 Performance Trust Share Class Performance Returns (%) QTR YTD 1 Year 3 Years 5 Years Since Inception Performance quoted is past performance, is no guarantee of future results and assumes that dividends and distributions are reinvested. Current performance may be lower or higher. Investment value will fluctuate, and shares, when redeemed, may be worth more or less than original cost. The net-of-fees performance presented is reflective of trading costs, management fees, and other administrative fees applicable to the specific share class shown. The management fee schedule for this share class is 8bp. Administrative and operating expenses which include, but are not limited to, custody, accounting and audit are reflected in the valuation of the fund. The Trustee has voluntarily determined to pay out of its resources any administrative expenses which exceed 1 bps. Investment Commentary Key Takeaways We believe unprecedented, post-financial crisis quantitative easing measures and massive inflows to passive investments are fueling a momentum rally that is significantly disconnected from underlying equity fundamentals we urge investors to be cautious in this environment, as previous momentum rallies have ended with sharp downside moves Our disciplined process for identifying stocks with strong fundamentals and attractive relative value seeks to avoid the momentum biases that are inherent in equity market indexes We believe our approach will help us steer a consistent course through the markets twists and turns Portfolio Review For the quarter ended June 3, 18, the strategy underperformed its benchmark, the Russell Growth index, due to stock selection. Stock selection within the retail and consumer services sectors detracted the most from performance. An allocation to cash, while within the typical range, was also a headwind during the period. By contrast, stock selection within the software and services and energy sectors contributed the greatest value. Key detractors from performance were Universal Electronics Inc., Dana Incorporated and Camping World Holdings, Inc. An overweight position in Universal Electronics (UEIC), a manufacturer of wireless remote controls, keyboards and gaming controls, detracted from performance. After the company missed earnings and sales expectations, investors sold off the stock, causing the share price to fall precipitously. CFO Bryan Hackworth stated that some customers have reduced their orders to rebalance inventory levels, preserve capital and manage their platform transitions, which had a negative impact on UEIC's performance during the period. Shares have begun to recover, however, with the help of a share buyback program announced by the company. An overweight position in Dana (DAN), a manufacturer of automotive, heavy truck and industrial market components and systems, detracted from relative performance. Despite reporting quarterly results that were slightly better than estimates, shares declined due to investor concerns that the auto and heavy-duty truck cycles could be nearing an end. Further intensifying the decline were the company s failure to acquire the driveline division of British automotive and aerospace components maker GKN plc, as well as investor concerns that DAN would miss its 18 earnings targets. An overweight position in Camping World Holdings (CWH) detracted from performance for the quarter. CWH witnessed weather related headwinds as winter extended into its peak selling season, causing a slowdown in sales. Despite mixed quarterly results that were roughly in line with estimates, investor concerns regarding deceleration within the recreational vehicle industry further weighed on the stock. Key contributors to performance were Trade Desk, Inc., Carrizo Oil & Gas, Inc. and Nektar Therapeutics. An overweight position in The Trade Desk (TTD), a technology platform for ad buyers, generated alpha during the period. Shares spiked following a well-received first quarter 18 earnings update, which indicated continued strength within TTD s existing customer base as well as new customer wins across all business segments and geographies. An overweight position in Carrizo Oil & Gas (CRZO) generated positive results during the period. Shares regained ground following the news that an activist private equity investor, Kimmeridge Energy Management, had increased its stake in the company. Kimmeridge has called for a number of potential changes in an attempt to re-rate the stock and to enhance shareholder value. An underweight position in Nektar Therapeutics (NKTR), a clinical-stage biopharmaceutical company that develops treatments for debilitating diseases, contributed to performance. Shares declined earlier this quarter when competitor Merck & Co, Inc. (MRK) released positive data about its Keytruda drug, tightening its grip on lung cancer treatments over NKTR s experimental cancer drug, NKTR-214. The share price fell further after phase-1 study results of NKTR-214, presented at the American Cancer Society of Clinical Oncology, failed to meet analyst expectations. Our underweight position in the company proved favorable, as shares continue to decline. Current Strategy and Outlook We believe unprecedented, post-financial crisis quantitative easing measures and massive inflows to passive investments are fueling a momentum rally that is significantly disconnected from underlying equity fundamentals. We urge investors to be cautious in this environment, as previous momentum rallies have ended with sharp downside moves. Our disciplined process for identifying stocks with strong fundamentals and attractive relative value seeks to avoid the momentum biases that are inherent in equity market indexes. We believe our approach will help us steer a consistent course through the markets twists and turns. measures the performance of small-cap growth stocks in the U.S. equity market including Russell companies with higher price-to-value ratios and forecasted growth. 2

4 Small Cap Growth Trust Fund - Class 2 2Q 18 Portfolio Highlights Sector Weights (%)* Sector Weightings* Russell Growth Index Overweight/ Underweight Consumer Discretionary Consumer Staples Energy Financials Health Care Industrials Information Technology Materials Real Estate Telecommunication Services Utilities Total Returns-Based Statistics (5 years ending 6/3/18) Standard Deviation (%) Tracking Error (%) Information Ratio Alpha (annualized %) Beta R-Squared (%) Sharpe Ratio Security Characteristics Weighted Avg. Cap ($ Millions) Active Share P/E (next 12 mos.) EPS Growth (3-5 Year Estimate) Price to Cash Flow ROA (%) Dividend yield PEG Ratio (next 12 mos.) 3, , Up / Down Capture Ratio Top Ten Holdings (%) Annualized rate of return (%) 4 Capture Ratio 93% Capture Ratio 93% Up Months 21 Down Months 4 Brink's Company j2 Global Inc. EMCOR Group, Inc. Planet Fitness, Inc. Class A Medidata Solutions, Inc. Integrated Device Technology, Inc. Childrens Place, Inc. East Group Properties, Inc. Woodward, Inc. Merit Medical Systems, Inc. Top Ten Active Weights (%) Brink's Company Childrens Place, Inc..99 EMCOR Group, Inc. j2 Global Inc. EBIX, INC..95 Extended Stay Amer, Inc..93 Merit Medical Systems, Inc. Jack in the Box, Inc. Planet Fitness, Inc. Class A Granite Construction Incorporated.9 *Ex-cash and other 3

5 Small Cap Growth Trust Fund - Class 2 2Q 18 Investment Management Investment Management ( IM) is the asset management business of Financial, a Fortune 5 company with over 6, employees seeking to help clients plan, invest and protect their savings. As of March 31, 18, IM managed approximately $227 billion * in assets across Fixed Income, Senior Loans, Equities and Multi-Asset Strategies & Solutions. Drawing on over 4 years of experience and the expertise of 25+ investment professionals, IM s capabilities span traditional products and solutions as well as those that cannot be easily replicated by an index. IM s award-winning culture is deeply rooted in a client-centric approach to helping investors meet their goals from insurance companies, corporate and public pension funds, sovereign wealth funds, endowments and foundations, and consultants to intermediaries, and individual investors. Reliability is why our clients hire us and it is why they trust us to navigate the path ahead. *As of 3/31/18. IM assets are calculated on a market value basis and include proprietary insurance general account assets of $87 billion. The principal risks are generally those attributable to investing in stocks and related derivative instruments. Holdings are subject to market, issuer and other risks, and their values may fluctuate. Market risk is the risk that securities or other instruments may decline in value due to factors affecting the securities markets or particular industries. Issuer risk is the risk that the value of a security or instrument may decline for reasons specific to the issuer, such as changes in its financial condition. More particularly, the strategy invests in smaller companies which may be more susceptible to price swings than larger companies because they have fewer resources and more limited products, and many are dependent on a few key managers. This information is proprietary and cannot be reproduced or distributed. Certain information may be received from sources Investment Management (" IM") considers reliable; IM does not represent that such information is accurate or complete. Certain statements contained herein may constitute "projections," "forecasts" and other "forward-looking statements" which do not reflect actual results and are based primarily upon applying retroactively a hypothetical set of assumptions to certain historical financial data. Actual results, performance or events may differ materially from those in such statements. Any opinions, projections, forecasts and forward-looking statements presented herein are valid only as of the date of this document and are subject to change. Nothing contained herein should be construed as (i) an offer to buy any security or (ii) a recommendation as to the advisability of investing in, purchasing or selling any security. IM assumes no obligation to update any forward-looking information. Past performance does not guarantee future results. Participation in a Collective Trust Fund is limited to eligible trusts that are accepted by the Trustee as Participating Trusts. Eligible trusts generally include (i) certain employee benefit trusts exempt from federal income taxation under Code Section 51(a); (ii) certain governmental plans or units described in Code Section 414(d), Code Section 457(b), and Code Section 818 (a) (6); (iii) certain commingled trust funds exempt from federal income taxation under Code Section 51(a); and (iv) certain insurance company separate accounts as defined in the Investment Company Act section 2(a) (17). Neither the Fund nor units of beneficial interest in the Fund are registered under the Investment Company Act of 194 or the Securities Act of 1933 in reliance on an exemption, under these acts applicable to collective trust funds maintained by a bank for certain types of employee benefit trusts. Collective Investment Trusts are not mutual funds and are not required to file a prospectus or registration statement with the Securities and Exchange Commission and, accordingly, neither is available. Portfolio Managers James Hasso Head of Small Cap and Portfolio Manager Years of experience: 23 Years with firm: 12 Joseph Basset, CFA Equity Analyst and Portfolio Manager Years of experience: 21 Years with firm: Investments Distributor, LLC 23 Park Ave, New York, NY 1169 All rights reserved. (8) Individual Investors (8) Investment Professionals FFC-SCG ( ex13118) PLAN INVEST PROTECT voyainvestments.com