As of 06-30-2018

Highlights

  • The U.S. equity markets were positive for the quarter
  • Investors continued to generally prefer growth stocks over value
  • The Health Care and Technology sectors contributed positively to the fund’s performance
  • Stock selection drove most of the fund’s positive returns

Looking Back

During the second quarter of 2018, the U.S. economy continued its positive momentum with continued employment gains, strong readings from the U.S. Purchasing Managers Index and rising interest rates. Most global equity markets were mixed throughout the quarter.  The U.S. equity markets were led by small-cap stocks, represented by the Russell 2000 Index, up 7.75%, followed by the Nasdaq Index, which was up 6.61%, followed by large cap stocks represented by the Russell 1000 Index, up 3.57%, and followed by mid-cap stocks represented by the Russell Mid-Cap Index, up 2.82%.  Mid-cap growth stocks also outperformed mid-cap value stocks, continuing the trend throughout the year.

During the second quarter, the portfolio team added the following equity positions: Translate Bio, Inc., Smartsheet, Inc., Horizona Discovery Group, GreenSky, Inc., Tesaro, Inc. and Avast Plc.

Also during the quarter, the portfolio subtracted the following positions in pursuit of better opportunities: Microsemi Corp., Kornit Digital, Sun Hydraulics, Cardlytics, Inc. and doBank SpA.

The fund participated in the following IPOs during the quarter: Translate Bio, Inc., Smartsheet, Inc., Greensky, Inc., Tricidia, Inc., Domo, Inc., Inspire Medical Systems, Wise Talent Information, The Lovesac, Co., Xeris Phramaceuticals and Uxin Ltd.

Performance

Federated Kaufmann Small Cap Fund Institutional Shares returned 8.40% at NAV for the three months ended June 29, 2018. That compares with its benchmark, the Russell 2000 Growth Index, which returned 7.24% during the same period.

Performance quoted represents past performance, which is no guarantee of future results. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than what is stated. Other share classes may have experienced different returns than the share class presented. To view performance current to the most recent month-end and for after-tax returns, click on the Performance tab.

Click the Performance tab for standard fund performance.

Performance Contributors

  • Stocks that made a positive contribution to performance included Tandem Diabetes Care, Inc., Ultragenyx Pharmaceutical, Inc., Inspire Medical Systems, Inc., CryoPort Inc. and Shotspotter, Inc.

Performance Detractors

  • Stocks that detracted from performance included AnaptysBio, Inc., Azul SA, GTT communications, Nektar Therapeutics and Mercury Systems

Click on the Portfolio Characteristics tab for the fund’s top 10 holdings

How We Are Positioned

As the U.S. economy enters the second half of 2018, the positive economic momentum continues; U.S. business confidence remains high; jobless claims are near a generational low and consumer confidence and the Institute for Supply Management Index are at record levels as well. Earnings growth is expected to be the driving force behind the equity markets as tax reform and U.S. GDP growth support profit growth.  Global markets face some new headwinds with trade discussions grasping the headlines.  The Federated Kaufmann funds continue to be focused in those sectors capable of generating significant earnings growth without dependence on a significantly improving economy.

This quarter the fund had approximately 75% of the portfolio invested in four sectors: Information Technology, Health Care, Consumer Discretionary and Industrials.  The sector weightings of the portfolio is a byproduct of our bottom-up stock selection strategy with a team of sector-specialist portfolio managers.   We seek to find companies that have company-specific catalysts for growth rather than develop macro themes to construct sector weightings.  Historically, these sectors also have provided good opportunities for bottom-up growth investors.