Delaware Investments U.S. Large Cap Growth Fund

 

Philosophy

The Focus Growth Equity team bases its investment strategy and process on the belief that potentially superior returns can be realized through holding a concentrated portfolio of companies with what we believe to be superior business models and opportunities to generate consistent, long-term growth of intrinsic business value. The team has a long-term investment horizon (at least three to five years), which it believes creates opportunities to exploit change that has gone unnoticed. The team's "play to win" investment style is reflected in its willingness to substantially deviate from benchmark weightings in pursuit of alpha.

Employing a "bottom up" research process, team members strive to identify high-quality, differentiated companies, irrespective of sector. Each member of the team, including those with portfolio management responsibilities, is an analyst first, with responsibilities for feeding research ideas into all portfolios.

In general, the team avoids companies that are very cyclical in their growth patterns, have heavy capital intensity, or are closely tied to commodity price movements.

It also shies away from merger and acquisition-driven "roll-up" companies, believing the outcomes of such situations can be inherently difficult to analyze. Instead, the team prefers companies that achieve growth through more organic methods.

Finally, the team is not typically attracted to initial public offerings, based on the belief that such companies lack the "track record" necessary to enable the team to analyze their business models.

Key areas

The team's company-by-company fundamental analysis focuses on three key areas:

  • Fundamental change
    Early identification of fundamental catalysts (such as new products, new management, or structural changes in an industry) is essential to generating attractive returns; as such, quantitative screens are not used to vet new ideas.
  • Business models
    The team seeks companies that have demonstrated a strong competitive advantage and operational efficiencies and whose management efficiently allocates capital. Of particular interest are companies that, over the long term, have demonstrated returns on invested capital over cost of capital.
  • Valuation/validation
    The team conducts a thorough review of a prospective company's cash-flow statement. It tracks how cash flow is reflected on the company's balance sheet and profit-and-loss statement. In doing this, the team seeks to uncover how the company manages its excess cash and reconciles accounting earnings with its cash economics. This information is used to unearth companies that the team believes will create shareholder value for the long term.

Other hallmarks of the team's investment process include:

  • Concentrated portfolio
    The team only invests in companies in which it has the highest conviction. With very few exceptions, the team invests in just one company in any particular business. This approach results in a concentrated portfolio of holdings that are broadly diversified across sectors and industries.
  • Long-term investment horizon
    The team takes a long-term approach to a company's growth potential, with a goal of holding securities for at least three to five years. As a result, portfolio turnover tends to be low (approximately 25% to 35% per year).
  • Focus on intrinsic business value
    The team expects more from its investments than just attractive revenue and earnings growth. Ultimately, its goal is to hold companies that maximize growth of intrinsic business value. The team also seeks to temper fundamental risk and valuation risk by evaluating returns on invested capital and the quality and stability of free cash flows.
  • Mix of stable and higher-growth companies
    The team seeks to allocate a significant portion of the portfolio to companies that hold or will hold a dominant position in attractive end markets. Often these companies exhibit steady growth in those markets and in their intrinsic business value. The team also typically allocates a portion of the portfolio to companies in the earlier stages of their growth cycles. Team members believe this approach — holding both steadily and rapidly growing companies — can help generate consistent performance in differing market environments.

Feature

Large-company emphasis, with the flexibility to own highly attractive mid-cap stocks.

Portfolio construction

  • Concentrated portfolio: 25 to 35 holdings
  • High return/low risk holdings: 4+%
  • Moderate return/low risk: 3% to 4%
  • High return/high risk: 2% to 3%
  • Maximum exposure to a single holding is 8%
  • Broad sector and industry diversification
  • Low turnover (roughly 25% to 35%)

Performance as of 30 April 2012

  YTD 1 year 3 year Since inception(24/12/2007)
Delaware Investments U.S. Large Cap Growth Fund (Class F $ (accumulating) shares, net of fees) 14.64% 5.65% 19.69% 0.23%
Russell 1000® Growth Index 14.51% 7.26% 21.42% 2.98%

The performance data quoted represent past performance; past performance does not guarantee future results. Investment return and principal value will fluctuate so shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted.

The Russell 1000 Growth Index measures the performance of the large-cap growth segment of the U.S. equity universe. It includes those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values. It is an unmanaged index and a theoretical measure of stock-market performance than an actual available instrument. You cannot invest directly in an index.

Portfolio characteristics as of 30 April 2012

Benchmark Index: Russell 1000® Growth Index

  Fund Index
5-year average EPS growth rate 21.2% 15.7%
Weighted average P/E ratio (1 yr. Fwd.) 17.6x 14.7x
Weighted average price/book ratio 3.4x 3.5x
Number of holdings 30 588
Weighted average market capitalization (millions) $84,178 $117,105
Median market capitalization (millions) $20,246 $6,575

Sector weightings as of 30 April 2012

  Fund Index
Technology 33.7% 27.8%
Financial services 20.7% 5.4%
Consumer discretionary 13.2% 17.5%
Healthcare 9.9% 10.1%
Energy 9.1% 10.2%
Producer durables 8.7% 12.6%
Materials and processing 2.8% 5.8%
Consumer staples 1.8% 10.1%
Cash 0.1% 0.0%

The Russell 1000 Growth Index measures the performance of the large-cap growth segment of the U.S. equity universe. It includes those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values. It is an unmanaged index and a theoretical measure of stock-market performance than an actual available instrument. You cannot invest directly in an index.

Jeff Van Harte

Jeffrey S. Van Harte, CFA Senior Vice President, Chief Investment Officer – Focus Growth Equity

Jeffrey S. Van Harte is the chief investment officer for the Focus Growth Equity team, which manages large-cap growth, smid-cap growth, all-cap growth, and global growth portfolios. Prior to joining Delaware Investments in April 2005 in his current position, he was a principal and executive vice president at Transamerica Investment Management. Van Harte has been managing portfolios and separate accounts for more than 20 years. Before becoming a portfolio manager, Van Harte was a securities analyst and trader for Transamerica Investment Services, which he joined in 1980. Van Harte received his bachelor's degree in finance from California State University at Fullerton.

Christopher J. Bonavico, CFA

Christopher J. Bonavico, CFA Vice President, Senior Portfolio Manager, Equity Analyst

Christopher J. Bonavico joined Delaware Investments in April 2005 as a senior portfolio manager on the firm's Focus Growth Equity team, which manages large-cap growth, smid-cap growth, all-cap growth, and global growth portfolios. Prior to joining the firm, he was a 
principal and portfolio manager at Transamerica Investment Management, where he managed sub-advised funds and institutional separate accounts. Before joining Transamerica in 1993, he was a research analyst for Salomon Brothers. Bonavico received his bachelor's degree in economics from the University of Delaware.

Christopher M. Ericksen, CFA

Christopher M. Ericksen, CFA Vice President, Portfolio Manager, Equity Analyst

Christopher M. Ericksen joined Delaware Investments in April 2005 as a portfolio manager on the firm's Focus Growth Equity team, which manages large-cap growth, smid-cap growth, all-cap growth, and global growth portfolios. Prior to joining the firm, he was a portfolio manager at Transamerica Investment Management, where he also managed institutional separate accounts. Before joining Transamerica in 2004, he was a vice president at Goldman Sachs. During his 10 years there, he worked in investment banking as well as investment management. Ericksen received his bachelor's degree from Carnegie Mellon University, with majors in industrial management, economics, and political science.

Daniel J. Prislin, CFA

Daniel J. Prislin, CFA Vice President, Senior Portfolio Manager, Equity Analyst

Daniel J. Prislin joined Delaware Investments in April 2005 as a senior portfolio manager on the firm's Focus Growth Equity team, which manages large-cap growth, smid-cap growth, all-cap growth, and global growth portfolios. Prior to joining the firm, he was a principal and portfolio manager at Transamerica Investment Management, where he also managed sub-advised funds and institutional separate accounts. Prior to joining Transamerica in 1998, he was a portfolio manager with The Franklin Templeton Group. Prislin received an MBA and bachelor's degree in business administration from the University of California at Berkeley.

  • Monthly holdings as of 30 March 2012
  • Quarterly holdings as of 30 March 2012

Portfolio holdings are as of the date noted above and are subject to change at any time. Holdings may not be representative of current or future investments and may not include the entire investment portfolio. Holdings information is made available to the public 30 calendar days after the most recent month-end for monthly holdings and 30 calendar days after the most recent quarter-end for quarterly holdings.

Holdings data is for informational purposes only, and is not intended as a recommendation, offer, or solicitation for the purchase or sale of any specific security. By accessing the portfolio holdings, you agree not to reproduce, distribute or disseminate the portfolio holdings, in whole or part. In no event shall the Macquarie Collective Funds plc or its affiliates have any liability relating to the use of the portfolio holdings.

Investors should consider the investment objectives, risks, charges, and expenses of the Fund carefully before investing. The prospectus contains this and other important information about the Fund and can be obtained by clicking here or calling +1-353-1-483-2429. Investors should read the prospectus carefully before investing or sending money.

Because this Fund expects to hold a concentrated portfolio of a limited number of securities, the Fund’s risk is increased because each investment will have a greater effect on the Fund’s overall performance.

The value of investments and any income will fluctuate (this may partly be the result of exchange rate fluctuations) and investors may not get back the full amount invested. Current tax levels and relief may change. Depending on individual circumstances, this may affect investment returns.

Fund finder

Class F $ Accumulating*

Currency USD
ISIN IE00B29Q9V65
Sedol B29Q9V6
CUSIP G2774C130
Bloomberg ID DLLCGFA

Fees and expenses

Management fee 1.35%
Expense ratio 1.70%

Literature

Prospectuses and reports

* For information on other share classes, please contact Delaware Investments at +1 215 255 1505 or at delawareoffshore@delinvest.com