Goldman Sachs analysts Amanda Sneider, David J Kostin, Stuart Kaiser, Ben Snider, Rima Reddy and Aaron Woodside present a report on titled all-new ‘Mutual Fundamentals’, which looks at some data regarding domestic mutual funds.
Inflexion Point in Investor Fund Flows
Domestic equity funds are likely to report their first year of annual inflows since 2007. Bond funds are on track to record the first annual net outflow since 2004.
According to the authors, “We believe losses in bond holdings – not just underperformance relative to equities – are a key factor in the improved retail investor risk appetite for stocks.”
Mutual funds: Investor preferences
Multi-cap Core funds attracted the strongest inflows. International equity was more popular compared to Domestic while ETFs stole a march over Mutual Funds.
Investors are looking at international equity with the glad eye as they chase diversification and growth.
Fund Overview
Type of Fund | # of Funds | AUM | Flows | Positioning | Performance |
Large Cap Core | 281 | $609B | (-$7.6B) YTD | OW: Healthcare/ UW: Utilities/Reduced Consumer Discretionary 14bps/ | 46% of funds outperformed the SP500 YTD |
Large Cap Growth | 195 | $575B | (-14B) YTD | OW:Financials/UW: Consumer Staples/Increased Information Technology exposure | 52% of funds outperformed the Russell 1000 Growth YTD |
Large Cap Value | 130 | $299B | (-3.9B) YTD | OW: Info Tech (MSFT most popular)/UW:Financials, Utilities and Energy | 52% of funds outperformed the Russell 1000 value YTD |
Small Cap Core | 241 | $225B | +$13B YTD | OW: Industrials and Consumer Discretionary/ UW: Info Tech, Financials, Consumer Staples, Healthcare | 34% of funds outperformed the Russell 2000 YTD |
Interesting Sidelights
Large-cap Core: These funds have reduced exposure in the traditionally overweight Consumer Discretionary sector to near about the benchmark levels.
Large-cap Growth: In the recent quarter these funds have turned overweight on the technology sector – Visa Inc (NYSE:V) and Google Inc (NASDAQ:GOOG) were the most overweight stocks while Microsoft Corporation (NASDAQ:MSFT) and International Business Machines Corp. (NYSE:IBM) were the most underweighted.
Large-cap Value: Microsoft Corporation (NASDAQ:MSFT), the second largest constituent of the iShares Russell 1000 Growth Index (ETF) (NYSEARCA:IWF), is the most popular non-benchmark holding for value funds.
Small-cap Core: The performance of this class of funds took it on the chin because of their low exposure to Health Care, particularly Biotechnology. Biotechnology outperformed the Russell 2000 by 1360 bp during the quarter as a result of earnings beats, positive pipeline news flow and M&A.
