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Portfolio > Mutual Funds > Equity Funds

Active Large-Cap Funds Just Had One of Their Best Months Ever

By Bernice Napach

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What You Need to Know

  • Nearly 70% outperformed their Russell 1000 benchmark, according to Bank of America Securities.
  • But just 53% of active large-cap funds beat the S&P 500 in May.
  • Analyst Todd Rosenbluth doesn't expect the data will influence the many investors who favor passive large-cap ETFs.

Actively managed large-cap mutual funds had one of their best-performing months ever this May, with nearly 70% outperforming their Russell 1000 benchmark, according to Bank of America Securities.

That’s far more than the 54% of individual stocks that outperformed the index that month. Year-to-date, 62% of actively managed large-cap funds are ahead of their benchmarks, according to BofA.

Core large-cap funds were among the strongest performers in May — 79% outperformed the benchmark — followed by value funds (71%) and growth funds (60%). The BofA Securities data is based on 1,498 large-cap funds.

Quantitative active funds posted even better numbers. BofA Securities also reported that 80% of quantitatively focused active funds beat the performance of the Russell 1000 index in May and year-to-date. The reason: their tilt toward value stocks, which has outperformed growth for most months this year, including May.

When its analysts compared the performance of active large-cap funds to the S&P 500, the picture changed. Just 53% of actively managed large-cap funds beat the S&P 500 in May, and 48% beat the index year-to-date.

The S&P 500 index tends to be tilted to slightly larger cap companies, and it is rebalanced quarterly, while the Russell 1000 rebalances annually.

The performance of actively managed small- and mid-cap funds was not as rosy as the performance of their large-cap counterparts. Of the 1,482 active small-cap funds that BofA Securities studied, 64%  small-cap active funds outperformed the Russell 2000 index in May, down from “monstrous 80-90% hit rates” in February through April. Year-to-date, three-quarters of small-cap funds are still ahead of their benchmarks.

Active mid-cap funds were the worst performing size group in May. Just  46% of the 826 funds BofA followed outperformed the Russell Mid-cap index.

Despite the strong performance of actively managed mutual funds, investors continue to shift to lower-cost, often index-based ETFs, according to Todd Rosenbluth, head of ETF & Mutual Fund Research at CFRA. “In the first five months of 2021, equity ETFs have gathered more than $300 million of fresh money,” says Rosenbluth. “Investors have focused less on short-term performance success and prefer the consistency and fee savings index ETFs have long provided.”

Bernice Napach

@Think_Napach

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