Large Cap Passive Equities
Investment Philosophy
We believe that the most tax-efficient way to manage a large-cap passive equity portfolio is by managing a separate account and replicating the S&P 100 Index®, which is highly correlated with but has lower turnover than the S&P 500 Index.
Investment Process
Our Large Cap Passive Equity product is managed as a separate account, utilizing lot accounting. Therefore, we are able to optimize each taxable client’s unique tax circumstances while simultaneously accommodating each client’s specific investment guidelines (e.g. limits and/or exclusions of individual holdings). Our investment process starts with a clear understanding of these investment guidelines. For client’s with no investment restrictions, we fully replicate the composition of the S&P 100 Index.1 For clients with investment restrictions, for example a 5% absolute limit for an individual holding (there are a few individual positions in the S&P 100 which exceed 5%), we reallocate to other holdings on a pro rata basis. We review the S&P web-site on a daily basis to determine if there are any corporate actions (e.g. spin-off’s, etc.) and/or planned changes to the composition of the S&P 100 Index. New holdings in the portfolio that result from corporate actions, but which are not in the S&P 100 Index, are sold from the portfolio on a timely basis. In accommodating client investment restrictions and/or changes to the composition of the S&P 100 Index, we strive to maximize the use of available portfolio cash and minimize turnover and net realized gains. Largely because of the inherently low turnover of the S&P 100 Index (historically averaging less than 3% per year), we do not practice active tax loss harvesting with our Large Cap Passive equity product.
1S&P 100® index allocations are determined by Standard & Poor’s Corporation.
Standard & Poor’s®, S&P®, S&P 100® and Standard & Poor’s 100 Index® are trademarks of the McGraw Hill Companies, Inc. and have been licensed for use by Duff & Phelps Investment Management Co. The product is not sponsored, endorsed, sold or promoted by Standard & Poor’s, and Standard & Poor’s makes no representation regarding the advisability of investing in the product. Indices are not available for direct investment.
Sector Allocations vs. Benchmarks (%)2*
| Portfolio | S&P 100® | S&P 500 |
| Financials |
16.3 |
16.0 |
16.4 |
| Information Technology |
22.2 |
21.8 |
18.9 |
| Consumer Staples |
14.1 |
13.9 |
11.2 |
| Health Care |
11.5 |
11.3 |
11.8 |
| Industrials |
9.8 |
9.6 |
10.6 |
| Consumer Discretionary |
8.1 |
7.9 |
10.4 |
| Energy |
11.7 |
11.9 |
10.9 |
| Telecommunication |
3.9 |
3.8 |
2.8 |
| Materials |
2.4 |
2.4 |
3.4 |
| Utilities |
0.0 |
1.4 |
3.5 |
Portfolio Characteristics vs. Benchmarks*
| Portfolio | S&P 100® | S&P 500 |
| Weighted Market Cap (bn) |
$110.0 |
$111.1 |
$75.1 |
| Median Market Cap (bn) |
$38.2 |
$38.2 |
$8.9 |
| P/E (Fwd 12 mos) |
11.7x |
11.6x |
12.1x |
| Dividend Yield |
2.4% |
2.4% |
2.2% |
| Dividend Growth3 |
7.0% |
7.0% |
8.0% |
| Earnings Growth4 |
10.0% |
10.0% |
11.0% |
| Return on Equity3 |
24.3% |
24.3% |
22.7% |
Source: Thomson Reuters
Risk/Return (10 Years) (%)
| R2 vs S&P 100® |
1.00 |
| R2 vs S&P 500 |
0.98 |
| S&P 100® Standard Deviation |
17.93 |
| S&P 500 Standard Deviation |
18.03 |
| Composite Standard Deviation |
17.88 |
| Tracking Error vs S&P 100® |
0.48 |
| Tracking Error vs S&P 500 |
2.27 |
Past performance is no guarantee of future results.
Periods ending 06/30/10.
2Sectors are based on the Global Industry Classification Standard (“GICS”), developed by and the exclusive property and a service mark of MSCI Inc. (“MSCI”) and Standard & Poor’s, a division of the McGraw-Hill Companies, Inc. (“S&P”) and is licensed for use by Duff & Phelps Investment Management Co. Neither MSCI, S&P nor any third party involved in making or compiling the GICS or any GICS classifications makes any express or implied warranties or representations with respect to such standard or classification (or the results to be obtained by the use thereof), and all such parties hereby expressly disclaim all warranties of originality, accuracy, completeness, merchantability and fitness for a particular purpose with respect to any of such standard or classification. Without limiting any of the foregoing, in no event shall MSCI, S&P, any of their affiliates or any third party involved in making or compiling the GICS or any GICS classifications have any liability for any direct, indirect, special, punitive, consequential or any other damages (including lost profits) even if notified of the possibility of such damages.
3Five-year average
4Estimated forward 3-5 years
*Material is supplemental to the Institutional Performance & Disclosure contained in the Product Profile. Portfolio information is based on a representative institutional account excluding cash. Holdings are subject to change.
Contact InformationPlease direct institutional inquiries to Dave Krause at (312) 917-6548 or Kyle West at (312) 917-6526.
Investment team
David Krause, CFA- Investment Grade Fixed Income & Large Cap Equity Product Specialist
Shalini Sharma, CFA, CPA- Senior Portfolio Manager