Mr. Araoz: Morgan Asset Management is a subsidiary of Regions Financial, an S&P 500 bank headquartered in Birmingham, Ala. Morgan Asset Management manages about 29 billion of assets, with clients ranging from high-net worth to institutional, pension funds, endowments, foundations, charities. We have about 11 billion in fixed income, 11 billion in equities and the rest in other assets. We employ portfolio managers from Texas to Tennessee, from Iowa down to Florida.
I am the Director of Equity Research, and I oversee the stock selection and portfolio construction for a number of our products. I also have responsibility for our large institutional value products, which I co-manage along with our CIO, Brian Sullivan.
TWST: Tell us about the large-cap value portfolio and what your definition of value is these days.
Mr. Araoz: Our large-cap value portfolio has a philosophy that basically hinges on three points. First and foremost, we are a high-quality manager - that will be true of all Morgan Asset Management products across fixed and equities. We believe that quality companies generate consistent shareholder value over time that will be realized by the market.
Second, quality companies can be bought at discounts at various points in the business cycle. As you may know, quality companies tend to trade at a premium, but you can buy them at discounts if you keep an eye on the right valuation metrics and if you buy them when they are out of favor. Our third point would be by combining measures of quality and measures of value, you can generate superior risk-adjusted performance. Your quality metrics and your quality bias will help dampen volatility. And by finding value at the right point in the business cycle, you can generate outsize returns. We think the combination of quality and value is the right way to approach the market, especially when you have a risk-adjusted return mandate.
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