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By Todd Rosenbluth In the first half of 2015, investors pulled $22 billion out of large-cap core U.S. equity mutual funds, but added $19 billion to S&P 500® Index-linked mutual funds. While this confirms that active management is losing share to passive, we think there are still strong active large-cap mutual funds to choose from. According to S&P Dow Jones Indices, just 23% of all large-cap core active funds outperformed the S&P 500 Index in the three-year period ended 2014 . (It is not possible to invest directly in an index, and index returns do not reflect expenses an investor would pay). On an equal-weighted basis, the average large-cap fund’s 18.6% three-year annualized return lagged the S&P 500 index by approximately 180 basis points. These performance challenges are not rare, as just twice in the past ten calendar years more than 50% of actively managed funds have beaten the “500”. A separate S&P Dow Jones study revealed how hard it is for those large-cap funds that outperformed to continue to do so. Indeed, just 4.5% of the outperformers in the 12-month period ended March 2011 maintained their top-half ranking in each of the four subsequent 12-month periods. The S&P Dow Jones Indices studies highlight that you would be better off with an index-based large-cap offering than choosing an average active fund. In fact there are many below-average performers. For example, the Davis New York Venture Fund (MUTF: NYVTX ) is among the biggest large-cap core funds, yet it lagged peers in four of the five last five calendar years. Indeed, NYVTX and its sister share classes had $2.8 billion of outflows in the first half of 2015. Of course, nobody aims to invest in a below-average mutual fund. S&P Capital IQ’s mutual fund rankings incorporate holdings-based analysis as well as a review of a fund’s relative track record and cost factors. We find 30 large-cap funds meet our criteria, though some of multiple share classes of the same portfolio. The list of funds included the American Century Equity Growth Fund (MUTF: BEQGX ), the Fidelity Fund (MUTF: FFIDX ), the T. Rowe Price Growth & Income Fund (MUTF: PRGIX ), and the Vanguard Growth & Income Fund (VNQPX). S&P Capital IQ hosted a client webinar on active versus passive strategies on Tuesday, August 4, but you can listen to a replay http://t.co/4KDPwLW9Aj . Reports on the aforementioned mutual funds and ETFs can be found on MarketScope Advisor. Disclosure: © S&P Dow Jones Indices LLC 2015. Indexology® [link “Indexology®” to http://www.indexologyblog.com/] is a trademark of S&P Dow Jones Indices LLC (SPDJI). S&P® is a trademark of Standard & Poor’s Financial Services LLC and Dow Jones® is a trademark of Dow Jones Trademark Holdings LLC, and those marks have been licensed to S&P DJI. This material is reproduced with the prior written consent of S&P DJI. For more information on S&P DJI and to see our full disclaimer, visit www.spdji.com/terms-of-use [make sure this appears hyperlinked]. Scalper1 News
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