Mr. Ransom: Silvant Capital Management is an LLC that is registered with the SEC, and we are a member of the RidgeWorth family of investment boutiques. RidgeWorth Investments is a wholly owned subsidiary of SunTrust Banks, Inc. So RidgeWorth is our parent and the bank is RidgeWorth's parent. Silvant manages about 4 billion in total. We manage money for institutional clients in large- and small-cap separately managed portfolios. We're also the sub-adviser to three RidgeWorth Funds, and I am the lead PM for the RidgeWorth Select Large-Cap Growth Stock Fund.
TWST: Tell us about your large-cap growth strategy.
Mr. Ransom: Let me say a little bit more about the structure of the firm because it helps better understand how we function. RidgeWorth, our parent company, provides what we call "utility functions," that is they do HR, trading, marketing, compliance, accounting, all those administrative functions, and that relieves the burden of those responsibility from the boutiques. All we have to do is to focus on investment management and client service.
Toward that end, Silvant Capital Management has three lead portfolio managers, seven what we call "sector portfolio managers" - other firms might call them analysts - one portfolio specialist and one client portfolio manager. We have 12 people dedicated solely to growth stock investing. We believe that evaluating changes in a company's earnings, valuation, capital deployment and what we call "market reaction" is the best method to determine potential stock price performance. Toward that end, we use a quantitative analysis system that evaluates companies on those four factors and ranks the companies from one to 10, with one being the most attractive companies and 10 being the least attractive. We then focus our fundamental analysis on the top three deciles. This methodology is based on a belief that stock market investors in general are inefficient evaluators of fundamental changes, and that a systematic approach to evaluating these changes provides us a competitive advantage. We try to outperform our benchmark and our peers over a full market cycle. We want to drive our out-performance through bottom-up stock selection, and we don't do macro top-down investment calls. We also want to maintain style consistency, and we want to achieve a level of performance that is sustainable and repeatable. Most importantly, we want this to be transparent to our clients. If we had to do this in step fashion, the first step would be the filtering process, where we do our quantitative ranking. The second step would be fundamental analysis, and that's where our sector portfolio managers play a very critical role in terms of providing to the lead portfolio managers a fundamental analysis based on how we look at companies. What the SPMs, as we call them, do is to develop an investment thesis and key metrics for every stock that we have identified in our investment universe. We try to understand the conditions under which, at least on a historical basis, the companies that we have an interest in have outperformed. In this way, we don't have to go look, necessarily, for new ideas. We have the ideas, we're waiting for the conditions to be in place that suggest to us is now time to invest.
On an ad hoc basis, we meet at any time to discuss not only new ideas but ideas that are beginning to wane and perhaps need to move out of the portfolio. We meet on a regular basis every morning at 9:00 a.m. to discuss events that impact the companies in our portfolios. We do this on a team basis so that we have the benefit in our discussions of all of the people that are involved in the investment process. We then try to construct portfolios to optimize performance and try to minimize what we call "unintended risk exposures." We do that using a quantitative system that's called Gram-X, Global Equity Risk Attribute Model. It is a quantitative system that allows one to understand the risk profile of your portfolio, where your performance risks are relative to some very key factors, like interest rates, economic growth, oil prices, market capitalization and currency. You know how you've constructed the portfolio and to make certain that you have not, through your bottom-up stock selection process, created an over-exposure to a factor that you did not intend.
For Select, we tend to almost always be large cap in terms of size; we tend to always be growth in terms of focus. The thing here that I think may be different, I'm not certain for all money managers, but we use a universe of 1,000 companies, the Russell 1,000, and not the Russell 1,000 growth universe. The growth universe only has about 625 companies. We do this because we think all companies will go through a growth cycle, and if we were to only use the Russell 1,000 growth universe to pick our names, we then would have precluded from inclusion in the portfolio about 300 other names that, at a point in time, will have a growth cycle. We want to have the opportunity to invest in those companies in their growth cycle. For us, growth is not to a category, it is a condition. When companies are exhibiting growth conditions and we think the valuation is reasonable, we want to have an opportunity to be involved in those names. From time to time, you may see a name in a portfolio that under traditional characterization would be called value. I don't dispute that, but we own it because we see above-average growth over our investment horizon, which is 12 to 18 months.
Tickers included in this excerpt: CVS, FLR, MO, PCLN, PM
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