361 U.S. Small Cap Equity Fund
For the month of May, the 361 U.S. Small Cap Equity Fund (ASFZX) declined 2.05%–relatively in line with the Russell 2000 index, which was down 2.03%. Returns to our behavioral models were overall positive. Among the sub-components, revenue revisions were the strongest. Analyst sentiment across the small cap universe declined from April, but remained marginally positive with a 50.6% revision ratio. A random sampling of the universe would have been expected to create a portfolio with just eight net positive revisions. Our strategy’s predictive ability was able to generate 252 net positive estimate revisions–244 excess revisions versus the random sample. Returns to positive revisions increased from April to 1.06%. Stock selection contributed positively to the Fund’s performance. As a group, Information Technology picks had the greatest benefit, while Industrials detracted the most.
The month was particularly difficult for value factors creating a bit of a headwind for some of the names in the portfolio. The Fund should continue to have an exposure to value as our research indicates this metric tends to perform well over time. Generally, the process we employ faces a more difficult environment when riskier, larger capitalized and richly-valued companies do best. Given these minor headwinds materializing in May, we were pleased with an equal-weighted portfolio that matched the benchmark, highlighting the robustness of the alpha thesis and models.