In this short article, I show that Large Cap and Growth funds managers, who should have performed well during the ongoing Covid-19 pandemic (Feb2020-Aug2020)1, have not performed well.
During the period Feb2020-Aug2020 (7 months), US Large Cap stocks outperformed US Small Cap stocks by 0.65%, US growth stocks outperformed value stocks by 27.37%. First, did Large Cap2 managers and growth3 managers outperform 4 the S&P500 (i.e. a blended benchmark)?
Table 1 shows that Large Cap managers (vs S&P500) underperformed and Growth funds (vs S&P500) outperformed during Covid-19. To conclude, Large Cap managers did not protect during that downturn.
Second, do these funds managers underperform more during the downturn (Feb-Mar) or the recovery (Apr-Aug)?
Table 2 shows that the Large Cap managers (27% vs 35% for S&P500) and the growth managers (36% vs 54% for MSCI USA growth)massively underperform during the recovery Apr2020-Aug2020.
To conclude, large caps managers and growth managers which should protect during equity market downturns:
What does this mean for a fund investor, assuming you wish to invest in mutual funds?
Feb 2020 - Aug 2020 Return | Remark | |
---|---|---|
Fama&French US large minus small capitalization | 40% | Large stocks performed like small stocks |
Fama&French US growth minus value capitalization | 20% | Growth stocks massively outperformed value stocks |
US large caps managers | 15% | Large cap managers underperform by far the S&P500 (i.e. a large cap index) and the large benchmark. 28% managers only outperformed the S&P500. |
US growth managers | 15% | Growth managers outperform by far the S&P500 (i.e. a blend value + growth index). 15% managers only outperformed the growth benchmark. |
Source: AlternativeSoft, Morningstar, msci.com
Feb 2020 - Mar 2020 returns | Apr 2020 - Aug 2020 returns | |
---|---|---|
US large caps managers | -18.55% (S&P500 = -19.57%) (MSCI USA small caps = -29.65%) |
27.83% (S&P500 = 35.43%) (MSCI USA small caps = 37.38%) |
US growth managers | -15.42%
(S&P500 = -19.57%) (MSCI USA growth = -16.18%) (MSCI USA value caps = -24.27%) |
36.32% (S&P500 = 35.43%) (MSCI USA growth = 54.29%) (MSCI USA value caps = 20.32%) |
Source: AlternativeSoft, Morningstar.
4 We expect the stocks to do so according to theory, so I wanted to control for the funds’ managers.
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