A rules-based strategy designed to exploit market inefficiencies in a disciplined systematic manner.
- For the quarter ended December 31, 2023, the Voya Corporate Leaders 100 Fund outperformed its benchmark, the S&P 500 Index (the Index) on a net asset value (NAV) basis.
- 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
U.S. equity markets ended the quarter on a high note, bolstered by economic resilience, waning inflation and a pause in the U.S. Federal Reserve’s interest rate hiking cycle. The S&P 500 Index rose by 11.69% and the Nasdaq Composite Index advanced by 13.56%. Information technology stocks led while utilities lagged. Growth stocks outperformed value stocks during the quarter, and small caps beat large caps.
The U.S. bond market staged a comeback during the quarter. The Bloomberg U.S. Aggregate Bond Index gained 6.82% on the unexpected strength of the economy. The 10-year U.S. Treasury yield moved from 4.69% at the beginning of the quarter to 3.88% by quarter-end as inflation eased and expectations of interest rate cuts in 2024 grew.
In our view, the side effects of the pandemic shock have mostly subsided, and inflation is the final piece of the puzzle. We view the recovery not as a classic business cycle, but as an economy trying to normalize following a natural disaster. First came the government-mandated lockdowns and the bust. Then came the re-openings and the effects of mega-policy stimulus. Lastly came the 180-degree reversal in monetary policy. Inflation peaked in June 2022 at 9.1%, which means that most of the disinflation we have seen since then has had little to do with Fed policy. We believe that disinflation could continue (and may intensify) over the next 18 months. Corporate earnings are accelerating as the U.S. consumer remains healthy and corporate fundamental factors are sound
Over the reporting period, the overweight and stock selection in the financials sector contributed the most to performance. Secondarily, the underweight to the energy sector contributed. At the individual stock level, overweight positions in Capital One Financial Corp., Simon Property Group, Inc. and U.S. Bancorp were among the key contributors.
By contrast, the underweight in the information technology sector and stock selection in the health care sector detracted. Among the largest individual detractors for the period were the underweight position in Microsoft Corp., overweight to Charter Communications, Inc. and underweight in Amazon.com, Inc.
As of the end of the reporting period, the Fund’s largest sector overweight was to the financials 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 12/31/23: Capital One Financial Corp. 1.19%, Simon Property Group, Inc. 1.16%, U.S. Bancorp 1.18%, Microsoft Corp. 1.06%, Charter Communications, Inc. 0.77% and Amazon.com, Inc. 1.07%; 0% indicates that the security is no longer in the Fund. Portfolio holdings are subject to daily change.