Consumer Discretionary, which started the year off poorly as negative sentiment surrounded the retail industry as reports of store front overcapacity surfaced, coupled with the negative effects of a proposed border adjustment tax, led performance in March. Contrary to last year, Energy continued its slide, declining 3.2% during the month, now down 10.8% on the year. Financials declined much in part due to banks, which dropped precipitously at the end of the month. Increased speculation that it would take longer for President Trump to complete his promised deregulation and tax reform was the culprit. Historically, banks have had higher tax rates when compared to the market as a whole.

Health Care and Energy have been a tale of two years. Health Care was the worst performing sector in the R2KV for 2016, underperforming the benchmark by almost 27%, while Energy outperformed by 12%. So far in 2017, Health Care has been leading the charge, returning 9.1%, with Energy being the worst, declining 10.8%.

Active management by style performed relatively well in the first quarter, with 54.0% of Value managers outperforming their benchmark. This was driven by managers being underweight the index in banks and Financials, which performed poorly, along with being in faster growing companies. Growth managers also did well, with 59.1% of managers beating their benchmark despite lower quality outperforming and biotechs, a perpetual underweight for Growth managers, driving returns. On the other hand, core managers performed the worst out of the group, with only 33.3% of managers beating their benchmark.

Article by Opus Capital Management

1, 2  - View Full Page