Voya Corporate Leaders® Trust Fund Series B Quarterly Commentary - 2Q22

Voya Corporate Leaders® Trust Fund Series B Quarterly Commentary - 2Q22

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A steady, balanced and long-term approach to U.S. blue-chips

Performance

For the quarter, the Trust outperformed its benchmark, the S&P 500 Total Return index (the “index”).

Market Review

The U.S. and non-U.S. financial markets sustained sizeable losses in the second quarter — including commodities, which until June had posted positive returns. With losses of more than 20%, large capitalization growth and technology stocks sank deeper into bear market territory. The S&P 500 index, a broad market gauge, edged toward a bear market cliff but didn’t fall over it. Globally, bonds also sustained losses as persistent high inflation, and attempts to control it by raising interest rates, sent yields up and prices down. The only assets to post positive returns were short maturity debt instruments such as 1–3 month U.S. Treasury bills.

Portfolio Review

The outperformance during the quarter was driven by the overweight and stock selection in the energy sector as well as an underweight in the consumer discretionary sector and lack of exposure to the information technology sector. Key contributors included overweights to Exxon Mobil Corporation and Marathon Petroleum Corporation, and not owning Amazon.com, Inc.

Conversely, stock selection in industrials and lack of exposure to the health care sector detracted from performance. Among key detractors for the period included the overweights to Union Pacific Corporation and Berkshire Hathaway Inc., and not owning UnitedHealth Group Incorporated.

As of the end of the reporting period the strategy’s largest sector overweights included the industrials and energy sectors, while the largest underweight sectors were consumer discretionary and communication services; the Trust does not currently hold positions within the information technology, healthcare and real estate sectors. Sector exposures are purely a function of the strategy’s quantitative investment discipline, however, and are not actively managed.

Outlook and Current Strategy

Russia’s war on Ukraine continued to warp market dynamics, pushing a surge of inflation. In response, the Federal Reserve (the “Fed”) pivoted to raising interest rates aggressively. The Fed policy response prompted worries that rate hikes would overshoot the need to curb inflation and cause a recession. Economic data began to show signs of slowdown in manufacturing and job growth, though prices continued to climb. On average, the number of S&P 500 companies issuing negative earnings per share (EPS) guidance for calendar year 2022 increased, though that number was about the middle of the range for the last ten years. Investors responded to these signals with accelerated stock selling, which pressured prices lower.

At some point, declining financial markets, higher interest rates and a stronger U.S. dollar ought to tighten financial conditions enough to curb inflation and give the Fed room to moderate its policy stance. Hopefully, this would allow the economy to stabilize without slipping into recession. Also, S&P 500 EPS guidance varies by sector: the highest numbers of companies issuing negative guidance occur within the health care, industrial and utility sectors; on the other hand, the highest numbers issuing positive guidance occur within the information technology, health care and industrial sectors. These variations suggest there may be room for equity markets to stabilize as inflation and monetary policy moderate.

The Voya Corporate Leaders Trust was created in 1935 with the objective of seeking long-term capital growth and income through investment, generally in an equal number of shares of common stock of a fixed list of American blue-chip corporations. The Trust’s portfolio investments are not actively managed. Stocks have only been added when corporate actions, such as mergers or spin-offs replace one of the original 30 companies. It currently holds investments in 20 American blue-chip corporations favoring the industrials, energy and materials sectors.

 

Holdings Detail

 

Companies mentioned in this report – percentage of portfolio investments, as of 06/30/22: Exxon Mobil Corporation 10.22%, Marathon Petroleum Corporation 7.53%, Amazon.com, Inc. 0%, Union Pacific Corporation 40.71%, Berkshire Hathaway Inc. 13.25% and UnitedHealth Group Incorporated. 0%; 0% indicates that the security is no longer in the portfolio. Portfolio holdings are subject to change on a daily basis.

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The Standard & Poor’s 500 Index is an unmanaged capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

Investment Risks: All investing involves risks of fluctuating prices and the uncertainties of rates of return and yield inherent in investing. Investing in funds that are concentrated in a smaller number of holdings poses greater risk than funds with a larger number of holdings because each investment has a greater effect on the Fund’s performance. The value of a participation fluctuates with the market value of the underlying portfolio securities of the Trust. The dividend income, if any, from the portfolio securities is subject to fluctuation which in turn will affect the amounts of distributions made to participants. An investor in the Trust has no assurance against loss in a declining market, and redemption at a time when the market value of the participations is less than their cost will result in a loss to the investor.

Taxation: For Federal income tax purposes, (1) the Trust will be treated as a fixed investment trust and will not be subject to Federal income tax, (2) each participant will be treated as the owner of his pro rata portion of the common stock of the corporations held by the Trust, (3) each participant will be required to include in his gross income his pro rata portion of the dividends and interest received by the Trust (including the amounts of such dividends and interest that are not distributed to participants but are used to pay the fees and expenses of the Trust), at the time such dividends and interest are received by the Trust, not at the later time such dividends and interests are distributed to participants or reinvested in additional participations, and (4) each individual participant who itemizes deductions may deduct his pro rata portion of the fees and expenses of the Trust only to the extent such amount, together with his other miscellaneous itemized deductions, exceeds 2% of his adjusted gross income. Please see the prospectus for further information.

An investment in the Fund is not a bank deposit and is not insured or guaranteed by the Federal Deposit Insurance Corporation, the Federal Reserve Board or any other government agency.

This commentary has been prepared by Voya Investment Management for informational purposes. Nothing contained herein should be construed as (i) an offer to sell or solicitation of an offer to buy any security or (ii) a recommendation as to the advisability of investing in, purchasing or selling any security. Any opinions expressed herein reflect our judgment and are subject to change. Certain of the statements contained herein are statements of future expectations and other forward-looking statements that are based on management’s current views and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. Actual results, performance or events may differ materially from those in such statements due to, without limitation, (1) general economic conditions, (2) performance of financial markets, (3) interest rate levels, (4) increasing levels of loan defaults (5) changes in laws and regulations and (6) changes in the policies of governments and/or regulatory authorities. Past performance is no guarantee of future results.

The opinions, views and information expressed in this commentary regarding holdings are subject to change without notice. The information provided regarding holdings is not a recommendation to buy or sell any security. Portfolio holdings are fluid and are subject to daily change based on market conditions and other factors.

The Fund discussed may be available to you as part of your employer sponsored retirement plan. There may be additional plan level fees resulting in personal performance to vary from stated performance. Please call your benefits office for more information.

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