Mr. Thomas said in an interview that industrials benefited from strong economic growth, which in turn helped a number of managers.
For the year ended June 30, the median return among overall domestic equity strategies was 6.1% in Morningstar's universe. The median return for the same period among growth strategies was 9.8%, while the median return for value was 3.9%.
The Russell 1000 Growth index returned 11.6% for the year ended June 30, while the Russell 2000 Growth and Russell 3000 Value indexes returned -0.5% and 7.3%, respectively.
Technology was once again a strong sector during the quarter, Mr. Thomas said, while energy was weak, perhaps the "worst performing sector in the quarter." He also noted "financials did pretty well," but more so the credit services companies like Visa Inc. and MasterCard Inc. than banks. "Payment processors has been an interesting story, and I've been hearing a lot more about that," he said. Growth within that industry is being "driven by both an increase in e-commerce and also a (cultural) shift from cash to cards," both domestically and overseas.
At the top of the one-year list as of June 30 was Elemental Capital Management LLC's midcap growth strategy, which posted a gross return of 33.7%.
"We run a very concentrated portfolio, which has the potential to deliver outperformance," said Michael Grizzard, Elemental Capital Management's managing member and chief investment officer, in a phone interview."
He said there are about 14 stocks within the strategy, which allows the firm to "take pretty sizable positions." He declined to disclose specific stocks in the portfolio.
Mr. Grizzard added that technology, and specifically software, is "by far the majority of where the outperformance came from."
"We really like niche companies that are dominant in their industry that have some sort of competitive advantage," he said.
Ranking second on both the one-year and five-year lists was Waltham, Mass.-based Granahan Investment Management Inc.'s Small-Cap Focused Growth strategy, which posted an annualized gross return of 32.47% for the year, and an annualized gross return of 22.9% for the five years ended June 30.
Granahan's senior vice president and managing director Drew Beja said in an interview that through the strategy, the firm seeks "companies on the right side of disruptive change."
"Like the Marines say, 'The Few, The Proud,' " he said. "We marry that (strategy) with a rigorous discipline around valuation, and that combination is serving us well."
Examples of such investments is LivePerson Inc., a New York-based technology company that develops artificial intelligence software and enables "big brands to message securely with their customers," according to Mr. Beja.
"LivePerson is at the forefront of this opportunity and they're extremely well-positioned to capture a large share of this market," Mr. Beja said. "They could grow rapidly."
Granahan also bought shares in Beyond Meat Inc., a Los Angeles-based producer of plant-based meat substitutes, shortly after the company went public on May 2.
"They're disrupting a huge industry," Mr. Beja said. "This stock went up in a hurry. We bought and sold our position within a 2 1/2-month period."
Morgan Stanley Investment Management Inc., New York, had two strategies that made the top 10 list, both growth. Coming in at third place is MSIM's Discovery strategy, returning a gross 30.6% for the year ended June 30, and at sixth place is its Insight strategy, returning 27%.
Dennis Lynch, Morgan Stanley managing director and head of counterpoint global, said in a telephone interview that while Discovery "focuses on investing in medium-sized companies that we think can be much bigger companies over time," the Insight strategy "has the ability to invest in small, medium and large companies, primarily domestically."
"We saw strong performance over the last 12 months over the midcap area, particularly in software companies and companies that produce software-as-a-service," said Mr. Lynch. "We have significant (software and SAAS) holdings in both funds."
Mr. Lynch added that through these strategies, MSIM is seeking "companies that are unique and have strong competitive advantages."
Stocks that did particularly well for the strategies include Veeva Systems Inc., a Pleasanton, Calif.-based cloud-computing software company focused on pharmaceutical and life science applications; Shopify Inc., an Ottawa, Ontario-based e-commerce company; and Coupa Software Inc., San Mateo, Calif., a software company that provides businesses with cloud-based spending management services.
The MSIM managing director noted SAAS companies "generally had very strong fundamental growth over the last 12 months. We didn't plan it that way. It is hard to know exactly when the market may reassess a company or industry in a very significant way. We are thinking long-term, over five and 10 years."
Atlanta Capital Management Co. LLC wound up with four of its strategies — all large-cap growth — on the list. Its Atlanta High Quality Focused Growth Wrap strategy, ranked fourth, returned 27.8% for the year ended June 30, while its Atlanta High Quality Focused Growth, coming in fifth, returned 27.5%.
The Atlanta High Quality Calvert Equity and Atlanta High Quality Growth Plus strategies, which came in eighth and ninth on the ranking, returned 26.3% and 25.5%, respectively.
"Everything we do is focused on high-quality businesses," explained Joe Hudepohl, managing director and principal portfolio manager for growth equities at Atlanta Capital. "We define high-quality as firms with consistent growth and stability in earnings that are not reliant on capital markets, and businesses that tend to do well regardless of the markets (and) are less cyclical than others."
Mr. Hudepohl said the company captured just a little more than half of the downside in the fourth quarter.
"The downside protection clearly helped our numbers," he said.
Tying in with what Morningstar's Mr. Thomas said about credit services companies doing well, Mr. Hudepohl cited Visa and Mastercard as stocks that "continued to help" returns for Atlanta Capital's domestic equities strategies.
Health care, with a focus on life sciences, also has been a strong sector for the Atlanta-based Eaton Vance subsidiary, with good performers including Danaher Corp., a Washington-based conglomerate concentrated in the fields of environmental and applied solutions, dental-related businesses, life sciences and diagnostics, and Thermo Fisher Scientific Inc., a Waltham, Mass.-based provider of analytical services and equipment for laboratories.
For the five years ended June 30, the top five remaining managers apart from Granahan were: Kayne Anderson Rudnick Small-Cap Sustainable Growth strategy, which returned an annualized gross return of 23.6%; Victory Capital Management Inc.'s RS Science and Technology composite, at 21.3%; J.P. Morgan Asset Management's U.S. Technology Leaders strategy, at 21%; and MSIM's Insight strategy, at 20.9%.
For the five years ended June 30, the median annualized return for domestic equity strategies was 8.6%, while growth and value strategies returned an annualized median 11.3% and 7.2%, respectively.Principal Global Investors' Blue Chip Equity Fund topped the list of collective investment trusts for the year ended June 30, returning a net 18.9% for the period. (The data do not contain gross returns for all funds.) PGI's Midcap Equity Fund CIT ranked second, posting a gross return of 18.6%.
Rounding out the top five were: T. Rowe Price Group Inc.'s New Horizons CIT, which returned a net 17.9%; American Century Investments' U.S. Opportunities Midcap Growth Equity CIT, 16.7%; and Wellington Management Co. LLP's CIF II Growth trust, 16.1%.
For the year ended June 30, the median return for overall domestic equity CITs in the Morningstar universe was 8.2% while the median returns for growth and value CITs were 10.4% and 5.1%, respectively.
For the five years ended March 31, the top-performing collective investment trust was SSGA's Nasdaq-100 index CIT, which returned an annualized net 16.1%. The rest of the top five were: Wellington Management's CIF II Growth trust, with an annualized net 15.9%; T. Rowe Price Group's New Horizons CIT, 15.8%; BlackRock's U.S. fundamental large-cap growth trust, 15.2%; and T. Rowe Price Group's Blue Chip Growth trust, 15%.
The median annualized return among domestic equity CITs in the Morningstar universe for the five years ended June 30 was 8.3%, while the growth and value annualized median returns for the period were 11.2% and 7.1%, respectively.
All data for Pensions & Investments' top-performing managers report are provided from Morningstar's global separate account/collective investment trust database. The data for the rankings on which this story is based were pulled Aug. 2.
