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During another difficult quarter for equities, the Munder Large-Cap Value Fund lagged slightly behind its benchmark due primarily to the performance of certain stocks in its materials and industrials sector. Many of these stocks had been strong performers over the past year, benefitting from exposure to the rapid growth that has been occurring in emerging economies. With more evidence during the quarter that the global economy was slowing, these stocks experienced a significant correction. In contrast, the Fund's financial holdings had strong absolute and relative returns, helping to boost the performance of the Fund. The energy sector was also a positive factor in the Fund's relative performance.
Even with the turmoil in the nation's financial sector, the Fund's financial holdings posted a double-digit increase compared to a low single-digit increase for its Russell 1000 Value benchmark. Many of the Fund's bank and diversified financial services holdings were up between 30% and 70% for the quarter, including JPMorgan Chase & Co. (3.4% of the Fund), PNC Financial Services Group (1.8%), Bank of America Corp. (2.3%), BB&T Corp. (0.8%) and U.S. Bancorp (1.4%), due to their perceived safe haven status. The strong performance of these stocks helped to boost the absolute returns of the Fund. In terms of relative performance, the Fund benefited from the managers' avoidance of the more problematic stocks for the quarter, including Fannie Mae, Freddie Mac, American International Group, Inc., Lehman Brothers Holdings, Inc., Washington Mutual, Inc. and Wachovia Corp. The Fund was also helped by the relative strength of its energy holdings, as well as its underweighted position in that sector.
Contrasting with these favorable factors, the relative performance of the Fund was negatively impacted by its position in General Cable Corporation (0.5%). The stock was weak due to concerns about eroding fundamentals in Europe and the implications of a global slowdown for emerging markets. We believe most of the demand for the company's products is more secular than cyclical and that the stock should recover once the credit scare passes. Similarly, the stock price of Cummins, Inc. (1.1%) fell during the quarter due to fear of future weakness in its end markets, which include mining and energy. In the materials sector, Freeport-McMoRan Copper & Gold Inc. (0.7%) weakened due to fears that global growth and construction activity will slow, causing copper pricing to continue its slide. We believe that continuing supply issues, as well as the likelihood of efforts to accelerate economic growth in China, which consumes about 60% of global copper production, should provide support for demand and pricing. The stock price of Nucor Corporation (0.8%) weakened significantly during the quarter because of concerns about non-residential construction activity and steel pricing, given the weak demand environment. To a lesser extent, relative Fund performance was hurt by the weak performance of some of the holdings in the utilities and consumer discretionary sectors.
During this period of market and economic uncertainty, our focus on companies that are efficient managers of their capital, characterized by solid profitability and balance sheets, gives the Fund a high-quality bias. This has helped the Fund outperform its benchmark over the past year. When combined with a focus on attractive relative valuations and catalysts that we feel should have a positive impact on companies' stock price, we believe that, relative to its benchmark, the Fund is well positioned for the current environment.
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| Past performance does not guarantee future results.
An investor should consider the Fund's investment objectives, risks, and charges and expenses carefully before sending money. This and other important information about the investment company can be found in the Fund's prospectus. To obtain a prospectus, please click here. Please read the prospectus carefully before investing.
RISKS
Equity securities (stocks) are more volatile and carry more risk, but generally have provided greater return potential, than investments in certain other securities, like high-grade fixed income securities. Large-cap stocks generally have less volatility than smaller-cap and certain specialty securities, such as technology investments. Value-based investments are subject to the risk that the broad market may not recognize their intrinsic value. A substantial portion of the Fund's assets are invested in the financials sector, whose performance can be significantly negatively impacted by economic downturns and changes in government regulation and interest rates. This Fund may invest up to 25% of its assets in foreign securities, which involve additional risks due to currency fluctuations, economic and political conditions, and differences in financial reporting standards.
Fund holdings mentioned in the manager commentary are as of 9/30/08. The portfolio holding information provided should not be considered as a recommendation to purchase or sell a particular security. There is no assurance that the securities mentioned remain in the Fund's portfolio or that securities sold have not been repurchased.
The statements and opinions expressed are those of the author(s) and do not necessarily represent the views of Munder Capital Management as a firm or the Munder Funds. While the information and statistical data contained in this material are based on sources believed to be reliable, it is current as of the time made and is subject to change without notice. Further, the information presented is general in nature and is not intended to provide personal investment advice or as an endorsement of any specific investment. The information does not take into account the specific investment objectives, financial situation and particular needs of any specific person who may receive it.
Munder Funds distributed by Funds Distributor, LLC.
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John F. Kreiter, CFA
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| Senior Portfolio Manager |
| BBA in Business Administration from Northwood University |
| MBA in Finance from Wayne State University |
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| Joined Munder Capital Management in 1995 |
| Years of Experience:18 |
| Focus:Member of Munder Capital's Large-Capitalization Value, Mid-Capitalization Value and Multi-Capitalization Value portfolio management teams, and co-manages the Munder Large-Cap Value Fund, the Munder Mid-Cap Value Fund and the Munder Energy Fund. Focuses on security analysis and selection with an emphasis on the energy, industrials, basic materials, telecommunication services and the consumer discretionary sectors and participates in portfolio strategy and administration. |
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Joseph W. Skornicka, CFA
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| Senior Portfolio Manager |
| BA in Financial Administration from Michigan State University
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| MBA from the University of Michigan |
| Started with Comerica, Inc. in 1988. Joined Munder Capital in 1995 as a result of the merger with Comerica and its investment subsidiaries. Left Munder in 2001; rejoined firm in 2004.
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| Years of Experience:20 |
| Focus:Member of the team responsible for managing the Large-Capitalization Value, Mid-Capitalization Value and Multi-Cap Value investment disciplines at Munder Capital, including the Large-Cap Value Fund and the Munder Mid-Cap Value Fund. Provides idea generation and research support in the financial services sector for other equity disciplines at Munder Capital. |
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Kenneth A. Smith, CFA
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| Senior Portfolio Manager |
| BBA from the University of Michigan |
| MBA from the University of Chicago Graduate School of Business |
| Joined Munder Capital Management in 1996 |
| Years of Experience:13 |
| Focus:Member of Munder Capital’s Large-Capitalization Value and Multi-Cap Value portfolio management teams, focusing on the technology and telecommunications industries. Also co-manages the Munder Internet Fund and the Munder Technology Fund. |
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| Munder Funds distributed by Funds Distributor, LLC. |
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