PNC Small Cap Fund seeks capital appreciation by primarily investing in stocks of U.S. small-cap companies with market caps matching the benchmark that may possess either value or growth characteristics. The Fund’s managers invest in companies based upon their Cash Flow Return on Investment (CFROITM). CFROI is an inflation-adjusted measure of corporate performance that attempts to reduce accounting distortions and allow for more accurate comparisons between companies, different market caps, sectors and industries. The Fund’s managers believe that CFROI provides a more accurate predictor of future value than other broadly used analysis methods.
- Identify Ideas: Companies with improving cash flow metrics trading at attractive valuations offer the best opportunities within small caps.
- Fundamental Research: Companies that continually grow cash flow have similar characteristics. This step of the process builds the backbone for our cash driver estimates and overall investment thesis.
- Investment Decisions: Investment thesis is based on our fundamental research. Cash flow metrics form the basis of our price drivers. Finally, we create a range of price targets that take into account the current economic environment and any biases that may impact a stock’s potential price.
- Portfolio Construction: In order to maximize our risk/return and maintain consistency, we construct our portfolios within well-defined risk parameters.
The market cap range of the benchmark frequently changes. As a result, the capitalization of companies in which the Fund invests may also change.
Investments in small-capitalization companies present greater risk of loss than investments in large companies. Investments in value companies can continue to be undervalued for long periods of time and be more volatile than the stock market in general. Investments in growth companies can be more sensitive to the company's earnings and more volatile than the stock market in general. International investments are subject to special risks not ordinarily associated with domestic investments, including currency fluctuations, economic and political change and differing accounting standards that may adversely affect portfolio securities. These risks may be heightened in emerging markets.