Small/Mid Cap Equity Manager of 2022: Tributary Capital Management

Tributary Capital Management is a winner of the Small Cap Equity 2021 Manager of the Year award thanks to the strong performance of its Tributary Small Cap, which Envestnet said was “driven by a combination of strong stock selection and factor tailwinds.”

The outperformance of Tributary’s Small Cap was especially impressive when one factors in the patience needed to stick with an investment process that had been challenged significantly in the past, especially in 2020, according to Envestnet.

Tributary has been managing the Small Cap portfolio since 1996 and did not change its strategy in 2021 despite unprecedented performance struggles, Envestnet noted.

Tributary’s Small Cap separate account composite returned 34% in 2021, outpacing the Russell 2000 Index by 19.2%. The team’s “process is bottom-up fundamentals and valuation-driven,” according to Mark Wynegar, president and portfolio manager, who said “it’s really a stock by stock decision-making process” that the team uses.

For example, Wynegar said one stock they owned in the portfolio, home health care company LHC Group, was “performing very well in 2020.” Then, in 2021, its stock “hit a weak patch where some things related to staffing, also some COVID trends, were impacting the company’s results and the stock weakened considerably,” he recalled.

But “on those pullbacks, we were adding to the stock at much lower prices than we had sold it and then, in early ’22, as it happened, UnitedHealthcare made an offer to buy the company and so we exited the position with a nice premium on a takeout,” Wynegar added.

Tributary’s goal is to “take businesses we own, businesses we can competently value, and let that drive and guide our decision-making,” he said. “And that’s an example that worked out well for us over the last couple of years.”