Voya MidCap Opportunities Strategy Quarterly Commentary - 4Q23

Voya MidCap Opportunities Strategy Quarterly Commentary - 4Q23

Actively managed mid-cap growth strategy that relies on fundamental research and analysis to identify companies with strong and accelerating business momentum, increasing market acceptance and attractive valuations.

Key Takeaways

  • The market finished the year on a high note, capping a strong year for equities. Inflation has begun to subside, and unemployment remains under 4% for the 22nd consecutive week. The underlying economy appears to be stronger than most anticipated.
  • For the quarter, the Strategy underperformed its benchmark, the Russell Midcap Growth Index (the Index), on a net asset value (NAV) basis primarily due to unfavorable stock selection, particularly within the industrials, financials and health care sectors.
  • Consumer confidence continues to increase, and there is cautious optimism that we can achieve the desired soft-landing scenario and avoid a recession going into the new year. Markets are already anticipating several rate cuts in 2024 which should be good news for equities.

Portfolio Review

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.

For the quarter, the Strategy underperformed the Index due to stock selection. Stock selection within the consumer discretionary and information technology sectors contributed the most to performance. The industrials, financials and health care sectors were the greatest detractors.

Key contributors to the quarter’s performance were CrowdStrike Holdings, Inc., Lululemon Athletica Inc. and Chipotle Mexican Grill, Inc.

An overweight position in CrowdStrike Holdings, Inc. (CRWD) contributed to performance. The company announced another strong quarter during the period and surpassed $3 billion in annual recurring revenue (ARR), the only security vendor to achieve this landmark. Management was also positive about FY2024 outlook.

A non-benchmark position in Lululemon Athletica Inc. (LULU) contributed to performance. The company reported strong results during the period, illustrating LULU’s ability to gain market share in a challenging environment.

A non-benchmark position in Chipotle Mexican Grill, Inc. (CMG) contributed to performance. The company reported strong results during the period with mid-single digit traffic growth and better-than-expected margins. Management also raised estimates going into 2024.

Key detractors for the quarter were Paycom Software, Inc., LPL Financial Holdings Inc. and Amylyx Pharmaceuticals, Inc.

An overweight position in Paycom Software, Inc. (PAYC) detracted from performance. The company had an uncharacteristically disappointing quarter and lowered the full-year revenue. Additionally, management provided lower than expected guidance for 2024 with the main culprit being Beti — PAYC’s new employee-guided payroll system which will continue to increase efficiency but also lower service revenue.

An overweight position in LPL Financial Holdings Inc. (LPLA) detracted from performance. The company reported solid earnings during the period, but cash balances continued to decline and money moving out of deposit sweeps into other assets remains a challenge.

A non-benchmark position in Amylyx Pharmaceuticals, Inc. (AMLX) detracted from performance. The company reported disappointing earnings that were well below consensus estimates due to an uptick in discontinuations and not enough new patient growth.

Current strategy and outlook

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.

Holdings Detail


Companies mentioned in this report – percentage of portfolio investments, as of 12/31/23: CrowdStrike Holdings, Inc. 4.01%, Lululemon Athletica Inc. 2.42%, Chipotle Mexican Grill, Inc. 1.69%, Paycom Software, Inc. 0%, LPL Financial Holdings Inc. 2.40% and Amylyx Pharmaceuticals, Inc. 0%; 0% indicates that the security is no longer in the portfolio. Portfolio holdings are subject to daily change.


The Russell MidCap Growth Index is an unmanaged index that measures the performance of those companies included in the Russell MidCap Index with relatively higher price-to-book ratios and higher forecasted growth values. The Index does not reflect fees, brokerage commissions, taxes or other expenses of investing. Investors cannot invest directly in an index.

Principal Risks: All investing involves risks of fluctuating prices and the uncertainties of rates of return and yield. Foreign Investing poses special risks including currency fluctuation, economic and political risks not found in investments that are solely domestic. Investing in stocks of Mid-Sized Companies may entail greater volatility and less liquidity than larger companies. The Portfolio may use Derivatives, such as options and futures, which can be illiquid, may disproportionately increase losses and have a potentially large impact on Portfolio performance. Other risks of the Portfolio include but are not limited to: Growth Investing Risks, Market Trends Risks, Other Investment Companies’ Risks, Price Volatility Risks, Liquidity Risks, Securities Lending Risks and Portfolio Turnover Risks. Investors should consult the Portfolio’s Prospectus and Statement of Additional Information for a more detailed discussion of the Portfolio’s risks. An investment in the Portfolio is not a bank deposit and is not insured by the Federal Deposit Insurance Corporation, the Federal Reserve Board or any other government agency.
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.

Insurance products, annuities and funding agreements issued by Voya Retirement Insurance and Annuity Company (“VRIAC”), One Orange Way, Windsor, CT 06095, which is solely responsible for meeting its obligations. Plan administrative services provided by VRIAC or Voya Institutional Plan Services, LLC (“VIPS”). Securities distributed by or offered through Voya Financial Partners, LLC (“VFP”) (member SIPC)or other broker-dealers with which it has a selling agreement. Only Voya Retirement Insurance and Annuity Company is admitted and can issue products in the state of New York. All companies are members of Voya Financial.

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.