The Top 10 Holdings of Our Ultimate Stock-Pickers' Index
Large-cap growth and large-cap value strategies maintain gains above index, market is undervalued.
Fund investors would like to see their actively managed funds beat the market every year, but they've been left wanting for well over a decade. The lack of consistent outperformance on the part of large-cap active managers (the main contributors to the Ultimate Stock-Pickers concept) has been well documented by the S&P Indices Versus Active Funds (SPIVA) U.S. Scorecard. For the 10-year period ending in June 2018, the index group noted that a striking 89.15% of large-cap managers have lagged their respective benchmarks. This year, only 28.6% of large-cap core managers have outperformed their index. Other investment styles fared better, as 58.0% of large-cap value managers and 63.7% of large-cap growth managers outperformed their respective benchmarks.
The last two years have seen some active managers fare better than past years. In 2017 and 2018, over half of both large-cap growth and large-cap value funds have outperformed their benchmarks. Between the growth and value strategies, growth has fared the best during this period. Morningstar's own indexes bear out this same pattern, as our large-cap core index (7.8% return) lagged our large-cap value index (8.6%), and both fared much worse than the large-cap growth index (27.4%). These returns reflect the time horizon SPIVA used (June 30, 2017 to June 30, 2018) and reveal that large-cap growth was the area with the most momentum. It should be noted that the market has been markedly different since the end of June with the current sell-off, and therefore these patterns may already have changed.
The Morningstar Ultimate Stock-Pickers Team does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.