Investors Loving Income in Large-Cap Funds
Equity funds with an emphasis on utilities, REITs, or dividends have been among peer leaders so far in 2014, but good stock-picking is becoming more important in terms of overall fund performance.
Equity funds with an emphasis on utilities, REITs, or dividends have been among peer leaders so far in 2014, but good stock-picking is becoming more important in terms of overall fund performance.
David Kathman: Large-cap domestic-equity funds aren't quite as sexy as some popular areas like alternatives, but they're still at the core of most people's portfolios. So it's important to know what's going on in that space.
In the first half of 2014, large-cap domestic-equity funds have been doing pretty well, and in general, large-value funds, have been doing quite a bit better than large-growth funds. That's largely because the sectors that people have been flocking to for income--things like utilities, energy, and REITs--those are much more prominently held by large-value funds than large-growth funds. And some of the best performing large-cap funds in the first half of this year have been dividend-focused funds because of those reasons, but a lot of them have been funds that just have concentrated portfolios and happen to be heavy in those areas or just in stocks, in general, that have done well.
So, we have some funds, such as ClearBridge Aggressive Growth, which are fairly aggressive. We have others that are more value-oriented, such as Oakmark Select. Those both are among the best performing large-cap funds in the first half of this year.
On the other hand, we have some other good funds that have been among the worst performers, things like Sequoia and Janus Forty, which are also very concentrated, and they have just made some bad bets.
What this tells me is that stock-picking is becoming more of a factor in how these large-cap funds perform than it has been in the past five years when macro considerations have been really the driving factor in a lot of fund performance.
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