Podcast Center
Video Center
Webcasts
Resource Center
Events
May 01, 2003 at 08:00 PM
Have concentrated portfolios performed better than non-concentrated funds over the long term? The results of a screen we ran show that for almost all categories within the domestic equity universe, concentrated funds have indeed outperformed their non-concentrated counterparts over the past decade.
For the purposes of our screen, we focused on funds having at least $50 million in net assets, at least 10 years of operating history and management tenure of greater than five years (as of March 31, 2003). These criteria yielded a total of 397 mutual funds. To further narrow the list to exclusively concentrated portfolios, we sought out funds where the top ten holdings accounted for at least 30% of total assets — resulting in 140 funds spread out over all nine investment style categories.
On average, for almost all style categories, the ten-year annualized return as of March 31, 2003, for the concentrated funds was greater than for non-concentrated funds (the two exceptions were mid-cap value and mid-cap growth categories.) Moreover, most of the concentrated funds in each category performed better than the average of all funds in each category, regardless of their concentration.
Although concentrated funds tend to be more volatile than non-concentrated funds, the results of our screen suggest that concentrated funds provide better reward relative to the risk they incur. The average risk-adjusted return for the concentrated funds in almost all categories (except mid-cap value and mid-cap growth) was better than the non-concentrated funds. The table below summarizes the results:
Number of Funds*
TotalConcentrated FundsNon-Concentrated Funds
- Large-Cap Blend721953
- Large-Cap Value1034162
- Large-Cap Growth874641
- Mid-Cap Blend1239
- Mid-Cap Value18810
- Mid-Cap Growth29623
- Small-Cap Blend11110
- Small-Cap Value31625
- Small-Cap Growth341024
- Large-Cap Blend7.698.147.54
- Large-Cap Value8.248.827.86
- Large-Cap Growth7.297.527.03
- Mid-Cap Blend9.1310.068.81
- Mid-Cap Value9.138.969.26
- Mid-Cap Growth6.965.937.23
- Small-Cap Blend10.2713.989.90
- Small-Cap Value10.1311.029.91
- Small-Cap Growth7.839.187.27
10-Year Sharpe Ratio
- Large-Cap Blend0.200.230.19
- Large-Cap Value0.250.270.24
- Large-Cap Growth0.150.160.14
- Mid-Cap Blend0.280.380.24
- Mid-Cap Value0.330.290.35
- Mid-Cap Growth0.110.070.12
- Small-Cap Blend0.320.470.31
- Small-Cap Value0.370.400.36
- Small-Cap Growth0.130.180.11
*Funds with at least 10 years of operating history, more than $50 million in assets, and portfolio managers with tenure greater than five years.
