By Canada Life Investment Management | Dec. 17, 2023

On Dec. 7, Lauren B. DeMore, Portfolio Manager at Putnam Investments joined the Canada LifeTM Portfolio Manager Connect Series call to discuss the meticulously crafted Canada Life U.S. Value Fund. She explained their differentiated strategy of combining fundamental research and quantitative tools for alpha generation. Find out more about this fund that seeks growth from undervalued stocks here.

What’s in this article:

1. A multidimensional approach to value investing
2. Define value outside the benchmark index
3. A focus on dividend growth
4. Building a portfolio with disciplined risk management
5. Complement growth style portfolios
   

The Canada Life U.S. Value Fund focuses on large-cap U.S. value stocks and employs a research-focused management style along with quantitative tools. It’s designed to be an all-weather value investing strategy. This fund uses a multidimensional approach, combining value stocks, dividend growers and cash flow generators. It seeks growth from undervalued stocks and targets companies with underappreciated fundamentals and the potential for growing dividends. The portfolio includes stocks of companies that may be positioned to increase their dividends, as well as stocks of companies with strong cash flows, earnings quality, and attractive capital allocation strategies. The fund aims to invest in attractively priced stocks of companies that are poised for improvement.

The Russell 1000 Value Index is revised each year by identifying a value universe of companies with lower price-to-book ratios and low growth rates. The managers evaluate opportunities daily and constantly monitor equity valuations aiming to uncover undervalued stocks that may be outside the benchmark index and have the potential to outperform the index. This approach allows the fund to target a wider array of opportunities and potentially generate higher returns for investors.

The Putnam Investments team defines the value universe by combining:

• All stocks that are highly rated by the Putnam Investments research team within and outside the Russell 1000 Value Index benchmark.
• The top 20% of securities identified by Putnam Investments proprietary multifactor quantitative model.
  

Putnam's value investing team believes that companies that can grow the dividend versus simply support a dividend can lead to outperformance over the long term. The investment process emphasizes company cash flows, earnings quality, and capital allocation. By differentiating companies that can simply support a dividend from those that can grow it, the fund aims to identify opportunities for superior returns.

The portfolio managers, supported by a team of analysts, carefully consider risk factors when constructing the portfolio. Stock-specific risk analysis is integrated into the investment process. The fund aims to understand the degree of risk associated with each position and ensure that the risk is properly balanced with return potential. The portfolio typically consists of 70-90 stocks, selected from a universe of 400-500 stocks. The investment process includes fundamental and quantitative research and sophisticated risk management techniques.

Value and growth investing are often seen as competing investment styles. While it can be tempting to follow trends and abandon a more diversified portfolio, it’s difficult to predict which style will outperform. Style diversification is a key component of a thoughtfully constructed portfolio, helping to smooth out returns over the long-term and remove potential market timing pitfalls. If you’re seeking to fill the value side of the equation, this fund can add style diversification to your portfolio to complement growth investing allocations. 

Talk to your Canada Life wealth wholesaler for more information. And check out this featured article in Wealth Professional, Unearthing value opportunities in the unpredictable American equity terrain, to hear more Putnam Investment’s Lauren DeMore provides as she provides insights on the U.S. economy’s challenges and the silver lining in value investing.

Access the expertise Putnam Investments brings to the Canada Life funds with Canada Life U.S. Value Fund.

This commentary is not to be used or construed as investment advice, as an offer to sell or the solicitation of an offer to buy, or an endorsement, recommendation or sponsorship of any entity or security cited. Although we endeavour to ensure its accuracy and completeness, we assume no responsibility for any reliance upon it.

The Canada Life U.S. Value Fund is available through a segregated funds policy issued by The Canada Life Assurance Company or as a mutual fund managed by Canada Life Investment Management Ltd. offered exclusively through Quadrus Investment Services Ltd., IPC Investment Corporation and IPC Securities Corporation. Make your investment decisions wisely. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently, and past performance may not be repeated. A description of the key features of the segregated fund policy is contained in the information folder. Any amount allocated to a segregated fund is invested at the risk of the policyowner and may increase or decrease in value.

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