Page 32 - Investment Advisor July/August 2021

2021 Asset Managers and Strategist of the Year Awards

Large Cap Equity Manager of the Year
Harbor Capital/Jennison Associates

Harbor Capital Appreciation Fund

arbor Capital Appreciation Fund intensive research the firm does: An
Hwon the Large Cap Manager of analyst found Tesla through research
the Year Envestnet/Investment Advisor into the battery industry.
award for several reasons, but a main one “It leads to a portfolio that is diversified
was the group’s 54.43% return. The fund across industry, and diversified across what
outperformed the Russell 1000 Growth I call sources of growth or rates of growth,”
Index by 15.94%, and in 2020, was in she says. So some industries might have
the top percentile of its peers as well 15% to 20% earnings growth. Their portfo-
as ahead of the 90 strategies Envestnet lio typically has 55 to 60 holdings, she says.
analysts reviewed for the category. In 2020, the firm moved quickly — as
Envestnet analysts noted that the early as February — once the pandemic
team’s “stellar stock selection” contrib- became visible. They already held stocks
uted about 14% to relative returns. that weren’t vulnerable, such as health
Kathleen McCarragher, co-manager of Kathleen McCarragher care, but they decided to sell others right
the fund, which is sub-advised by Jennison away, such as aerospace and travel.
Associates, says the core approach of the Years co-managing Harbor Capital “Much of what we owned actually ben-
fund is a research-driven, bottom-up, Appreciation Fund: 23 efited by an acceleration in their demand,”
high-conviction portfolio that is bench- Years with Jennison: 23 she says. That included ecommerce,
mark-agnostic. The team also includes Sig Years in industry: 42 e-entertainment and technology, so stocks
Segalas, Blair Boyer and Natasha Kuhlkin. they held such as Microsoft, Amazon and
When it comes to selecting companies, Costco did well. “We benefited by some of
McCarragher explains: “Quite simply, we Jennison headquarters: New York our existing positions in that digital trans-
believe that companies that can create true Year firm was founded: 1969 formation landscape, enterprise payments
economic value over the long term will and on-demand consumption,” she says.
generate superior growth and earnings Number of employees: 361 The team was “surprised by the speed
and cash flows. Those will be the driver of AUM as of March 31, 2021: and depth, both down and up [of the mar-
excess returns over the long term. That’s $224.3 billion ket], and the magnitude and pace of the
easier said than done, because growth Harbor headquarters: Chicago recovery, partly driven by the magnitude
does not persist for most companies at a and pace of the decline.” But she notes
high level for a long period of time.” Year firm was founded: 1983 that part of the recovery was the gov-
The team is looking at a three- to five- Number of employees: 181 ernment’s fiscal and monetary response.
year time horizon in which a company AUM as of April 30, 2021: $61 billion “There could have been a very different
has a “competitive, proprietary advantage. outcome if it weren’t for that,” she says.
It’s usually something driven by secular McCarragher notes that the move
change within industries in today’s world,” McCarragher says. toward value stocks in the fourth quarter of 2020 “really hasn’t
Today, that typically means technology-driven and structur- affected our view of the opportunity set in our portfolio or our com-
al changes that create growth. For example, digital innovation panies. I would characterize it as any time you had a big reevalua-
has been the largest source of change, she says. It isn’t just the tion of growth, there tends to be a period of what I call ‘back in and
“underpinnings” of running an organization, “but its move into fillings’ where those stocks need to grow into those valuations. So
strategic initiatives at the enterprise level: how to reach the it’s not a surprise they did well relative to the segment of the market
customer, how to organize, understand and leverage the data that was significantly impaired by the shutdowns.”
being created in today’s digital world and how to utilize those As the country moves toward reopening, she’s not surprised
to drive future growth.” to see growth stocks underperform, since “you’ve got a resur-
And if they like a stock, they’ll hold it. For example, they gence in operating profits in the more cyclical names in the
purchased Tesla in 2013 and have continued to add and reduce market. But those recovery moves tend to be shorter-lived than
the position as necessary. That stock, too, is an example of the the duration and opportunity we see in growth names.” —GS

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