Page 31 - Investment Advisor July/August 2021

Large Cap Equity Manager of the Year
Columbia Threadneedle

Columbia Contrarian Core SMA

essimism is the key to success at to be determined and investment merit.
P the Columbia Contrarian Core This final one is when the names finally
SMA. The actively managed fund, which make it into the portfolio, Pope says.
won the Envestnet/Investment Advisor The portfolio has 60% to 80% turnover
2021 award for Best Large Cap Equity per year; when the market is more vola-
fund manager, topping 90 peers, had a tile, the turnover goes up. Pope says an
23.1% return in 2020, beating the Russell advantage to their contrarian approach
1000 index by 2.1 percentage points. is that it makes them wait. “A lot of times
What Guy Pope, head portfolio man- people are just reacting to the news flow.
ager of the fund, means by “pessimism” …. I like [our process] because it makes
is that they are looking for stocks trading us wait for a better entry point, a cheaper
in the bottom third of the 52-week range entry point,” he says.
high. Most people get excited when He calls 2020 a “fascinating year,” in
CNBC talks about stocks hitting 52-week Guy Pope which they started hearing in January
highs, “[and] optimism is fine, but that’s about the “virus in Asia and we got a little
not where we want to start,” he says. Title: Senior Portfolio Manager concerned and started to trim some stocks
With his team, Harvey Liu, Nick Smith Years with present firm: 28 that were relying on Asian consumers, but
and Michael Welter — and a support Years in financial services: 28 the market shrugged it off very quickly,” he
group of fundamental analysts, industry recalls. At first they wondered if they had
experts and quantitative pros — Pope made a mistake, but then in February the
defines those pessimistic stocks by look- Investment/asset class focus: market went into its “waterfall decline.”
ing through a prism. For example, if a Large Cap U.S. Equity Having been a portfolio manager for
stock starts at $100 and after several Asset management firm: Columbia 28 years, Pope says he’s built up “mental
events drops to $50, that’s when they Threadneedle Investments models” for markets, but “there is no page
get interested. It’s also been “de-risked,” in the playbook for any portfolio manager
Pope says, noting that it doesn’t have Firm headquarters: Boston on how to deal with a pandemic.”
much further to fall. Year firm founded: 1985 He said the downdraft of the mar-
“That’s not always true, but some- Number of employees: 2,000 ket was so severe that their indicators
times it’s the case,” Pope explains. “We eventually “looked very similar to past
do careful, fundamental bottom-up AUM as of March 31, 2021: corrections, where at a certain point
[research] where we reach out to the $564 billion you have to turn from being defensive
company. From [here] we do our stock to being opportunistic. It made us think
selection process.” back to [the] fourth quarter of 2008, the summer of 2011 and
On average, the fund owns 60 to 80 stocks. “It’s not a con- December of 2018.” And that meant leaning into a correction,
centrated portfolio, but may be slightly more concentrated “and when you are leaning into a correction, you want to make
than the average core manager out there,” he explains. sure you’re buying stocks that can outperform on a market
When a team member finds a stock that is of interest, they rebound versus everything.”
apply a “three-alpha approach,” Pope says. First, they contact He says his team also did well because of the “two phases
the company, “engage” with management and “collect all the to last year. The first three quarters, growth [stocks] outper-
available public information out there,” he says. The second formed [due to the] Fed taking rates to zero and saying they
source of alpha is the fundamental research that comes from would keep them there awhile.” Also, FANG stocks, such as
the equity analysts. Finally, there is the quantitative team that Amazon and Netflix, benefited from the pandemic. In the
uses a multi-factor model on how the stock is rated. fourth quarter, however, value stocks did better. When the
“After we utilize all three sources of alpha, we will come to firm’s research pointed to a faster vaccine development, they
an independent conclusion or investment thesis,” he says. That added value stocks to the portfolio, which “helped us outper-
falls into one of three categories: market efficiency, thesis still form [too] in the fourth quarter.” —Ginger Szala

JULY/AUGUST 2021 INVESTMENT ADVISOR 29