|S&P 500||8.10%||8.10%||4.22%||Large-cap stocks|
|Nasdaq Composite||9.18%||9.18%||9.64%||Large-cap tech stocks|
|Russell 1000 Growth||7.39%||7.39%||6.25%||Large-cap growth stocks|
|Russell 1000 Value||8.80%||8.80%||3.51%||Large-cap value stocks|
|Russell 2000 Growth||9.46%||9.46%||5.22%||Small-cap growth stocks|
|Russell 2000 Value||9.50%||9.50%||3.94%||Small-cap value stocks|
|MSCI EAFE||9.62%||9.62%||0.83%||Europe, Australasia & Far East Index|
|Lehman Aggregate||0.83%||0.83%||2.23%||U.S. Government Bonds|
|Lehman High Yield||5.93%||5.93%||14.00%||High-yield corporate bonds|
|Carr CTA Index||0.96%||0.96%||4.91%||Managed futures|
|Through April 30, 2003.|
“Core and explore” investing, a strategy that grew out of market participants’ desire to beat the market during the late 1990s, is in vogue once again.
Over the last few years, practitioner journals have published a number of well-regarded studies that trumpet the benefits of core and explore versus the more classic multi-asset-class approach.
Core and explore proponents put the bulk of their assets in a low-cost, broadly diversified index fund, and attempt to generate excess return by allocating the balance to a handful of actively managed funds.
The renewed interest in core and explore may be due to a parallel resurgence in sector-based investing. With the globalization of the world economy, there is considerable doubt whether regional factors adequately explain the return of a given stock. At the same time, global industry classification systems like the ones developed by Morgan Stanley Capital International (MSCI) will soon allow investors to research and choose every stock in a given industry without regard to geographical location
At present, 63% of European assets are now allocated on a sector basis rather than a country or cap basis, up from 22% in 1997, according to MSCI. Institutional investors in the U.S. also seem to be jumping on the bandwagon.