Check into the UBS U.S. Large Cap Equity Fund (BPEQX), and you'll find a team of 20 analysts using a bottom-up approach when selecting stocks for its portfolio. "The analysts are split up by sectors and specialize in those sectors," says Tom Digenan, a U.S. equity strategist at UBS in Boston. "And no stock in the portfolio is in there [just] because somebody from the portfolio construction team had a good feeling that it should go in."
With research as its guide, the fund currently holds about 70 stocks in its portfolio. Two areas of interest are financial services and health care, where holdings include Citigroup, Mylan and Wells Fargo.
While Digenan points out that the largest companies usually don't outperform the market, he thinks large caps look attractive now from a valuation perspective. He says the fund emphasizes high-quality, low-volatility under-performers that have solid cash flow and are able to pay dividends and repurchase shares.
Who should invest in this type of fund? "Investors with long-term focuses who want exposure to the overall U.S. equity market," says Digenan, who cautions that it's not for those wanting a deep-value or high-growth fund. "This is a core holding fund that we believe should outperform the market over a full market cycle, regardless of market conditions."
Dian Vujovich is an author, syndicated columnist and publisher of fund-investing site www.fundfreebies.com.