Union Small Cap Fund Direct Growth INF582M01BU9

Union Small Cap Fund earns an Average Process Pillar rating.

The most significant contributor to the rating is the firm's retention rate of the firm's portfolio managers, which is 83% over the timeframe for which data is available, up to five years. The size of the portfolio management team also bolsters the rating. With two portfolio managers, the fund is reasonably well-resourced. However, the process is limited by the fund's weak long-term risk-adjusted performance. This can be seen in its 10-year alpha calculated relative to the category average, which suggests that the process has struggled over that period.

This strategy has more exposure to the Growth factor than the Small-Cap Morningstar Category average. But in terms of size exposure, it does not have much of a bias and resembles the typical portfolio. Examining additional factor exposure, this strategy has constantly downplayed yield, with its portfolio holding fewer companies with high dividend or buyback yields compared with Morningstar Category peers in recent years. Returning capital to shareholders often is not the highest priority of such businesses. The shares of such companies can deliver strong returns if they fulfill their growth projections, but they also carry more risk. In the latest month, the strategy was also less exposed to the Yield factor compared with Morningstar Category peers. This strategy also has had an overweight bias to the volatility factor over these years, meaning it has owned companies that have a higher historical standard deviation of returns. Such stocks tend to rise faster and fall harder than the broad market. High-volatility exposure contributes to stronger performance during bull markets, but often at the cost of losing more during downturns. Compared with category peers, the strategy also had more exposure to the Volatility factor in the most recent month. During the last few years, this strategy has also tilted in favor of high-quality stocks, those that have demonstrated low financial leverage and solid return on equity. High exposure to the quality factor means holding companies that are consistently profitable, growing, and have solid balance sheets. In this month, the strategy also had more exposure to the Quality factor over its peers. More information on a fund and its respective category's factor exposure can be found in the Factor Profile module within the Portfolio section.

The portfolio is overweight in industrials and technology relative to the category average by 2.9 and 2.6 percentage points, respectively. The sectors with low exposure compared with category peers are consumer defensive and financial services, underweight the average by 4.1 and 2.5 percentage points of assets, respectively. The portfolio is positioned across 72 holdings and is relatively concentrated. In particular, 25.4% of the strategy's assets are housed within the top 10 holdings, compared with the typical peer's 17.9%.