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Small Cap Equity Quantitative Equity

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Strategy Goal

Our Small Cap Equity Strategy is based on the belief that, over multiple market cycles, investing in stocks with strong fundamental business models at attractive prices will add value versus a passive benchmark. However, we are also cognizant of the impact that shorter-term pressures can have on markets. So, though our primary focus is always our core belief, we also stay alert to these other influences and believe that they can create additional opportunities to add value.

Our Process

How We Make Equity Strategies Work For You:

Discover

We seek to identify companies capable of generating returns for you. We also consider secular trends that lend themselves to long-term investment horizons.

Assess

We evaluate risk and reward based on our expectations of company fundamental performance.

Invest

We value assets relative to market and growth prospects.

Monitor

We monitor our investments closely. If we believe the investment prospects are less than we expected, we remove the stock from the portfolio.

Objective

The objective of Cavanal Hill’s Small Cap Equity Strategy is to generate a total return, net of all fees, in excess of the Russell 2000 benchmark over rolling three to five year periods.

Account Minimums and Fees

First $5,000,00070 bps
Next $5,000,00065 bps
Next $15,000,00060 bps
Next $25,000,00055 bps
Next $50,000,00050 bps
More Than $100,000,00045 bps
Account Minimum: $2,000,000
Cavanal Hill reserves the right to waive account minimums at its discretion.

Strategy Construction

Strategy Construction
Strategy Construction

Cavanal Hill’s small cap investment process is centered on evaluating stocks based upon four primary attributes:

  1. Trading Behavior: Companies are evaluated based upon their price volatility and increasing (or decreasing) trading volumes to help determine general investor interest and to manage market impact costs.
  2. Quality: Companies are evaluated based on fundamental attributes that may help identify which businesses have stable or improving results.  These are also employed in analyzing which companies have a greater risk of having liquidity shortages, being delisted, or declaring bankruptcy.
  3. Profitability: Companies are evaluated based upon various profit metrics such as their historical cash-flow return on assets and growth in profit margins.  Comparisons are made against other companies in a similar industry to determine which businesses are relatively more and less profitable.
  4. Value: Companies are evaluated based upon various valuation metrics such as forward earnings to price and cash-flow to price.  Comparisons are made against other companies in a similar industry to determine which businesses are relatively more and less undervalued.

Selecting stocks along each of these dimensions independently can provide attractive return potential; however, the combined impact of these themes generates diversification and produces an improved risk profile that is more conservative relative to the Russell 2000.