U.S. large cap growth continues to outperform value, but value managers outperform benchmark as growth managers struggle to keep pace with Russell 1000 Index

Last quarter data from Investment Metrics, a Confluence company, showed that despite rising rates, growth stocks outperformed value stocks during the first quarter. That trend continued in the second quarter as the median growth manager outperformed the median value manager by more than 7%. As figure 1 highlights, the disparity between growth and value year to date is now 20%.

While Growth stocks have been performing well, active growth managers have struggled to keep pace with the Russell 1000 Growth Index. Active value managers on the other hand outperformed the Russell 1000 Value Index for the month, quarter, and year to date. Below we spotlight what drove the performance of active large cap value managers as of June 30th, 2023, based off the 10th business day preliminary data of IM Peer Groups.

Summary of Active U.S. Large Cap Value Equity Manager Performance:

• Year to date, the median active U.S. large cap value manager outperformed their benchmark by 50 basis points compared to the median U.S. large cap growth manager which underperformed by more than 3%.
• The top quartile value performers were mainly fundamental products, which averaged less than 40 holdings and active shares over 85%.
• As noted in our recent Factor Performance Analysis for June 2023 Growth, Volatility and Size clearly outperform in U.S. equities over the second quarter and year to date.
• Top quartile U.S. large cap value performers benefited from exposure to Growth, specifically Sales Growth & Forecast Growth, as well as Volatility & Momentum factors. (Figure 3)
• From a sector perspective, the top performers benefited from being overweight the benchmark and peers within Information Technology & Consumer Discretionary stocks, and underweight Energy. (Figure 4)

Investment Metrics Plan Universe is the industry’s most granular analytics tool for plan sponsors including standard and custom peer group comparisons of performance, risk, and asset allocations by plan type and size. The data is sourced directly from our reporting and analytics solution that is relied on by leading investment consultants, advisors and asset owners, representing over 4,000 institutional plans and $4T in assets. Updated three times every quarter, the data includes 20+ years’ history on institutional investment plans.

Disclaimer

The material presented in this document is an assessment of the market environment as of the date indicated; is subject to change; and is not intended to be a forecast of future events or a guarantee of future results. This information should not be relied upon by the reader as research or investment advice regarding any funds or any issuer or security or similar.

This document contains general information only, does not consider an individual’s financial circumstances and should not be relied upon for an investment decision. Rather, an assessment should be made as to whether the information is appropriate in individual circumstances and consideration should always be given to consult a Financial Advisor before making an investment decision.

Investment Metrics, a Confluence company, does not provide investment advice and nothing in this document should be considered any form of advice. Investment Metrics accepts no liability whatsoever for any information provided or inferred in this document.

About Confluence

Confluence is a leading global technology solutions provider committed to helping the investment management industry solve complex data challenges across the front, middle and back offices. From data-driven portfolio analytics to compliance and regulatory solutions, including investment insights and research, Confluence invests in the latest technology to meet the evolving needs of asset managers, asset owners, asset servicers, and asset allocators to provide best-of-breed solutions that deliver maximum scalability, speed and flexibility, while reducing risk and increasing efficiency. Headquartered in Pittsburgh, PA, with 750+ employees in 15 offices spanning across the United Kingdom, Europe, North America, South Africa, and Australia, Confluence services over 1000 clients in more than 40 countries. For more information, visit www.confluence.com.