A rules-based strategy designed to exploit market inefficiencies in a disciplined systematic manner.
- For the quarter ended December 31, 2022, the Voya Corporate Leaders 100 Fund (the Fund) outperformed its benchmark, the S&P 500 Index (the Index).
- During the quarter, the Fund continued to follow its strict rules-based investment approach.
- At the beginning of the quarter, the Fund held equal-weighted positions in the stocks of the S&P 100 Index (implying that each holding represented about 1% of the portfolio).
- Over the course of the quarter, if the value of a security increased by more than 50%, * the position size was reduced to 1%, and if the value of a security decreased by more than 30%, * the position was eliminated.
Current strategy and outlook
The major US and non-US stock Indexes overcame negative returns in December to end the fourth quarter with gains. US stock results varied by market capitalization: Midcaps were the strongest performers, followed by large caps, then by small caps. Across market cap segments, value styles outperformed growth styles. Technology stocks continued to suffer from rising interest rates and posted losses for the quarter.
Broad gauges of US and non-US bonds posted gains for the quarter, though non-US bonds gained more than twice as much as US bonds. Results varied at the asset-class level: Long-term US Treasury securities sustained the largest losses, whereas long-term corporate bonds and high yield were among the strongest performers. Shorter-term corporate bonds and government securities saw positive returns.
Investors can be forgiven for wanting to put 2022 in the rearview mirror. High inflation, rate hikes, market volatility, the war in Ukraine and resurging Covid infections top the list of things we would like to move past. Will 2023 bring more troubles, or do investors have reasons for optimism? The Eurozone appears to be headed for a recession, whereas the United States seems slightly less at risk. The markets are hunting for imbalances, such as whether China’s return to growth will be stymied by its significant debt burden. There is at least one reason for optimism: The end of the global interest-rate hiking cycle may be in sight, letting markets focus more on economic fundamental factors.
Over the reporting period, stock selection in the consumer discretionary sector and the overweight and selection in industrials contributed the most to performance. The underweight and selection in the information technology sector was the 3rd largest contributor. At the individual stock level, the underweight positions in Tesla Inc., Apple Inc. and Amazon.com, Inc. were among the key contributors.
By contrast, the underweight to the energy sector detracted. Among the largest individual detractors for the period were the underweight to Meta Platforms Inc., overweight to PayPal Holdings, Inc. and Salesforce, Inc.
As of the end of the reporting period, the Fund’s largest sector overweight was to the consumer staples sector, while the largest sector underweight was information technology. Sector exposures are purely a function of the strategy’s rules-based investment discipline and are not actively managed.
Companies mentioned in this report – percentage of Fund investments, as of 12/31/22: Tesla Inc. 0%, Apple Inc 0.83%. and Amazon.com, Inc. 0.67%, Meta Platforms Inc. 0%, PayPal Holdings, Inc. 0.73% and Salesforce, Inc. 0.82%; 0% indicates that the security is no longer in the Fund. Portfolio holdings are subject to daily change.
*If a security is underperforming the S&P 500® Index and the S&P 500® Index is positive on an intra-quarter basis, the security will typically be sold when it declines by 30% or more, irrespective of the percentage difference versus the S&P 500® Index. If a security is underperforming the S&P 500® Index and the S&P 500® Index is negative on an intra-quarter basis, the security will typically be sold when it underperforms the S&P 500® Index by 30 percentage points or more. This change went into effect on 5/18/20.
Voya Corporate Leaders® 100 Fund Quarterly Commentary - 4Q22