Friday, July 1, 2016

Performance of the Marquette University AIM Small Cap Equity Fund as of 6/30/2016

Here is a quick view of the performance of the AIM Small Cap Equity Fund for the period ending on June 30, 2016. The AIM Class of 2017 began their tenure managing the AIM Funds on April 1, 2016; therefore this represents their first quarter performance results.

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As the chart above shows, the AIM Class 2016 had a strong finish to the quarter and generated excess returns. Even with the global challenges posed on markets as a result of Brexit, the fund generated alpha. The following chart shows that over the course of the past year, the AIM Small Cap Fund has struggled (like many active managers) versus the Russell 2000 Index. The same issues that brought challenges to international equities (i.e. negative interest rates, Brexit, energy price volatility, and currency fluctuations), have impacted US equities. Both the benchmark and the AIM Small Cap Fund posted negative returns over the past year.  



The AIM Small Cap Equity Fund out-performed the benchmark (Russell 2000 Index) for the second quarter – posting a positive return of 4.38% versus 3.87% for the benchmark.  


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The Information Technology, Financials and Materials sectors were the major under-performers; while Energy, Consumer Staples, Industrials, and Health Care were the best over-performing sectors. The small cap space is well known for a high level of volatility and Q2 2016 did not deviate from the norm. Five stocks (Basic Energy, Malibu Boats, Emergent BioSolutions, SuperMicro Computer, and John B. Sanfilippo & Son) experienced losses in the quarter that exceeded -25%. In early July their performance will be re-evaluated and if the stocks remain below -25% relative return they will be sold and the proceeds placed into the Russell 2000 ETF.  The second quarter also witnessed some spectacular performance of stocks in the AIM Equity Fund.  Flotek Industries nearly doubled (+96%), and Exact Sciences +86%, Teladoc +65, and MGP Ingredients +55% had amazing returns.  The following table shows all individual holdings during the quarter by sector and versus the benchmark.



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The table below shows that the portfolio remains relatively sector neutral per the range established within the AIM investment policy statement. The Information Technology, Financials and Materials sectors are under-weight because of the weak relative performance during Q2. The differences in sector weights are shown with and without the ETF individual holdings allocated to their respective sectors. The next portfolio sector adjustments will occur in early September following the students return to campus.


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The next table displays the top 10 holdings as of 6/30/2016. It is noted that no individual holding exceeds a 3.2% portfolio position.


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The following table shows the key characteristics of the AIM Small Cap Fund as of 6/30/2016. For the most part, the AIM Small Cap Fund consists of holdings that are of similar quality as those in the Russell 2000 Index.


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Additional AIM Small Cap Fund characteristics by sector are provided in the next table.


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The next slide is FactSet's style chart for the AIM Small Cap Fund.


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The AIM Small Cap Equity Fund should be well positioned for the remainder of the summer with no significant sector exposure.As soon as the students return to campus they will be presenting new stocks for consideration. Each Friday afternoon there are equity presentations delivered by the AIM students - either in the AIM Room or at area investment companies. 

Every AIM equity write-up since the inception of the program in 2005 can be found on the AIM website at: http://business.marquette.edu/centers-and-programs/aimp-student-equity-write-ups.







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