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2018 Was Equity Funds' Worst Year in a Decade

Katie Rushkewicz Reichart, CFA

Katie Reichart: As 2018 wound to a close, U.S. equity funds posted their worst calendar-year results in a decade. Concerns about a trade war with China and rising interest rates led to a fourth-quarter market pullback, erasing the gains many funds had made for the year. All nine U.S. style box categories ended the year with losses.

Generally, value did worse than growth and small caps underperformed large caps. Sector wise, energy was the biggest laggard amid sluggish oil prices, hurting value-oriented funds.

The worst category was small value, down 15.5%. The best performing category was large growth, down 2.1%. Some growth companies viewed as long-term secular winners continued doing well amid the broader slowdown, including Amazon and Netflix.

Some active equity managers bucked the trend and posted gains. Silver-rated Alger Small Cap Focus was up 14% on the back of strong healthcare picks. Gold-rated AMG Yacktman maintained its defensive edge, leading all large-value peers with a 2.7% gain.

It's also worth remembering that it was just the third calendar year in the past decade that the broad equity categories posted losses. All nine style box categories still had double-digit gains for the trailing 10 years through 2018.