Zephyr Financial Solutions

Zephyr Releases PSN Top Guns List Highlighting Best-In-Class Separate Accounts, Managed Accounts and Managed ETF Strategies

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Q4 2022 PSN Top Guns – Markets Rally While the Fed Sees Things Differently

Stock markets around the world finished a tumultuous 2022 on a strong note as the MSCI World index posted a +9.89% return during the fourth quarter. Despite the Federal Reserve (Fed) indicating that it will keep interest rates higher-for-longer, investors focused on the prospect that inflation may have peaked and the Fed will slow the pace of its policy tightening.

While equities rallied during the last quarter of 2022 bond markets signaled some disappointment in the Fed’s hawkish tone during the quarter which caused Treasury yields to rise during the end of the quarter. Concern over the Fed’s hawkish tone combined with growing evidence of slowing economic growth resulted in a slight gain for the Bloomberg U.S. Treasury 7 – 10 Year index (+0.97%).

U.S. equities (S&P 500 index) posted a solid +7.56% return during the quarter as investors balanced the ongoing hawkish tone from the Fed with indications that the pace of the Fed’s interest rate hikes will slow and inflation could be cooling. Value stocks (Russell 3000 Value index +12.18%) continued to benefit from the higher interest rates as the style continued to outperform growth stocks (Russell 3000 Growth index +2.31%) during the quarter. Furthermore, the energy (S&P 500 Energy Sector index +22.81%) and industrials (S&P 500 Industrials index +19.22%) sectors outperformed while the communication services (S&P 500 Communication Services index -1.38%) and consumer discretionary (S&P 500 Consumer Discretionary index -10.18%) sectors underperformed. Below are some of the strategies that make up the PSN Top Guns Small Cap Value universe.

  • Donald Smith & Co., Inc.: Small Cap Value Equity (+20.6% for the quarter)
  • Aegis Financial Corporation: Small Cap Value (+20.6% for the quarter)
  • Pzena Investment Management, LLC: Pzena Small Cap Focused Value (+20.2% for the quarter)

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The story was similar overseas resulting in a very strong quarter for European equities which outperformed other major regions (MSCI Europe index +19.42%). Indications that inflation was finally cooling in Europe as well as in the U.S. combined with a slower pace of interest rate hikes from the European Central Bank provided the catalysts for the strong performance. Additionally, stronger local currencies relative to the U.S. Dollar provided a boost for foreign equities. Economically sensitive sectors like energy, financials and consumer discretionary outperformed while more defensive sectors like consumer staples lagged the broader market. The following strategies made the PSN Top Guns list for the Europe Universe.

  • ARGA Investment Management, LP: ARGA European Equity Strategy (+26.2% for the quarter)
  • Wellington Management Company LLP: European Contrarian Value (+26.0 for the quarter)
  • Newton Investment Management Group: Euroland Small Cap Equity (+24.1% for the quarter)

The Fed continued its rate hiking cycle by increasing rates two more times during the quarter. After hiking rates by 75 bps for a fourth straight time early in the quarter, the Fed’s last hike of the year was a scaled back 50 bps to bring its key short term benchmark rate to 4.50%. While indicators pointed to cooling inflation, a continued hawkish tone from the Fed added volatility to bond markets. While the yield on the 10-year Treasury rose from 3.83% to 3.88% during the quarter, the 2-year Treasury yield jumped from 4.28% to 4.42% following the higher-for-longer rhetoric from the hawkish Fed. Global bonds  (FTSE World Government ex. US index +6.55%) which benefited from the softening U.S. Dollar and colling inflation outperformed while high yield bonds were the leading U.S. fixed income sector (BofA Merrill Lynch US High Yield +3.98%). Below are some of the strategies that make up the PSN Top Guns International Fixed Universe.

  • Franklin Templeton Investments: Franklin European High Yield (+16.0% for the quarter)
  • Columbia Threadneedle Investments Intl: European High Yield Bond (+14.3% for the quarter)
  • UBS Asset Management: Euro High Yield (+14.2% for the quarter)

The complete list of PSN Top Guns list can be found here. If you do not have a login, you may register for complimentary access. For more details on the methodology behind the PSN Top Guns Rankings, or to purchase PSN Top Guns Reports, contact Margaret Tobiasen at Margaret.tobiasen@informa.com.


PSN Top Guns quarterly commentary is presented by Zephyr's Market Strategist Ryan Nauman whose analysis and research has been shared on financial industry media including WealthManagement.com, Reuters, CNBC, Bloomberg, MarketWatch.com, Yahoo! Finance, and the Wall Street Journal, while being a regular guest on TD Ameritrade Network, Yahoo! Finance, Bloomberg TV, Bloomberg Radio and Chuck Jaffe’s Money Life podcast.