Voya Large Cap Value Strategy Quarterly Commentary - 4Q22

Voya Large Cap Value Strategy Quarterly Commentary - 4Q22

Seeking the Potential of High-Dividend Yield and Dividend Growth

Voya Large Cap Value Strategy Quarterly Commentary - 4Q22

Actively managed portfolio aiming to achieve a dividend yield that exceeds the average dividend yield of the companies included in the Russell 1000® Value index.

Key Takeaways

  • Markets finished the year with continued volatility, with stocks rallying in October and November before falling again in December to close out the year. The US Federal Reserve continued hiking rates in an attempt to ease inflationary pressures, and questions remain as to whether or not taming inflation will lead to recession. The Ukraine and Russia conflict also remains a factor for the global economy.
  • For the quarter ended December 31, 2022, the Strategy outperformed the Russell 1000 Value Index (the Index) due to stock selection effects. The industrials, consumer staples and communication services sectors contributed the most to performance. Conversely, the health care and energy sectors were key detractors to performance.
  • While inflation appears to have peaked and the Fed has shown signs of moderating its aggressive rate hikes, we are entering into a new phase of uncertainty regarding the likelihood of a recession, as well as its potential magnitude. If and when the Fed pivots on rates may determine if the kind of volatility, we have seen will continue into 2023.

Portfolio Review

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.

For the quarter ended December 31, 2022, the Strategy outperformed the Index due to stock selection effects. The industrials, consumer staples and communication services sectors contributed the most to performance.

Overweight positions in Apollo Global Management Inc., JPMorgan Chase & Co. and United Rentals, Inc. added the most to performance.

An overweight position in Apollo Global Management Inc. (APO) contributed to performance. The company reported solid earnings results, mainly driven by high spread related earnings (SRE) from higher rates and robust net flows, as well as higher transaction fees.

An overweight position in JPMorgan Chase & Co. (JPM) contributed to performance. The company reported strong earnings with stronger net interest income (NII) and better than expected fee revenue

An overweight position in United Rentals, Inc. (URI) contributed to performance. The company announced strong earnings results with in-line sales and solid year over year revenue growth. Management noted that despite increasing cross-currents in the economy, consumer sentiment remains encouraging. URI also acquired Ahern Rental at an attractive valuation during the period.

Conversely, the health care and energy sectors were key detractors to performance. An overweight position in PayPal Holdings Inc., not owning Exxon Mobil Corp. and an overweight position in Assurant, Inc. were the biggest individual detractors.

An overweight position in Paypal Holdings, Inc. (PYPL) detracted from performance. Although the company reported solid earnings, they were boosted by reserve releases in the transaction loss allowance, despite losses increasing during the period. In addition, they missed estimates on Total Payment Volume (TPV), and that number is expected to continue to decelerate amidst existing macro concerns.

Not owning a position in Exxon Mobil Corp. (XOM) detracted from performance. XOM reported strong earnings driven by high gas prices, oil volumes, and product segment earnings being partially offset by higher spending. They also reported stronger free cash flow (FCF) than consensus, giving them increased optionality.

An overweight position in Assurant, Inc. (AIZ) detracted from performance. The company preannounced disappointing earnings and a reduced guidance. In addition to challenges from inflation increasing costs and the broader economic slowdown, AIZ saw a decline in mobile devices covered and serviced along with moderation in auto growth

Current Strategy and Outlook

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.

Holdings Detail

Companies mentioned in this report – percentage of Strategy investments, as of 12/31/22: Apollo Global Management Inc. 1.53%, JPMorgan Chase & Co. 4.94%, United Rentals, Inc. 1.56%, PayPal Holdings, Inc. 1.16%, Exxon Mobil Corp. 0%, and Assurant, Inc. 0%. 0% indicates that the security is no longer in the portfolio. Portfolio holdings are subject to daily change.


The Russell 1000 Value index is an unmanaged index that measures the performance of those Russell 1000 companies with lower price-to-book ratios and lower forecast growth values. The index does not reflect fees, brokerage commissions, taxes or other expenses of investing. Investors cannot directly invest in an index.

Investment Risks: All investing involves risks of fluctuating prices and the uncertainties of rates of return and yield inherent in investing. An investment in securities of larger companies carries with it the risk that the company (and its earnings) may grow more slowly than the economy as a whole or not at all. Value investing securities that appear to be undervalued may never appreciate to the extent expected and are generally more sensitive to changing economic conditions. Foreign investing poses special risks including currency fluctuation, economic and political risks not found in investments that are solely domestic. The risks of emerging markets securities may be intensified. Because the Fund may invest in other investment companies, you may pay a proportionate share of the expenses of that other investment company, in addition to the expenses of the Fund. Other risks of the Fund include but are not limited to: company, convertible securities; dividend risks; interest rate, investment model, market trends; inability to sell securities; real estate companies and real estate investment trusts (“REITs”) and securities lending risks. Investors should consult the Fund’s Prospectus and Statement of Additional Information for a more detailed discussion of the Fund’s risks.

The strategy employs a quantitative model to execute the strategy. Data imprecision, software or other technology malfunctions, programming inaccuracies and similar circumstances may impair the performance of these systems, which may negatively affect performance. Furthermore, there can be no assurance that the quantitative models used in managing the strategy will perform as anticipated or enable the strategy to achieve its objective.

The strategy is available as a mutual fund or variable portfolio. The mutual fund may be available to you as part of your employer sponsored retirement plan. There may be additional plan level fees resulting in personal performance that varies from stated performance. Please call your benefits office for more information.

Variable annuities and group annuities are long-term investments designed for retirement purposes. If withdrawals are taken prior to age 59½, an IRS 10% premature distribution penalty tax may apply. Money taken from the annuity will be taxed as ordinary income in the year the money is distributed. An annuity does not provide any additional tax deferral benefit, as tax deferral is provided by the plan. Annuities may be subject to additional fees and expenses to which other tax-qualified funding vehicles may not be subject. However, an annuity does provide other features and benefits, such as lifetime income payments and death benefits, which may be valuable to you.

Variable investments, of any kind, are not guaranteed and are subject to investment risk including the possible loss of principal. The investment return and principal value of the security will fluctuate so that when redeemed, it may be worth more or less than the original investment. In addition, there is no guarantee that any variable investment option will meet its stated objective. All guarantees are based on the financial strength and claims paying ability of the issuing insurance company, who is solely responsible for all obligations under its policies.

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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 does not guarantee 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.