Reweighting the dice in favor of active management


The author of the Spiva report and director of global research at S&P, Berlinda Liu, said: “Growth funds dominated all capitalization segments during the one-year period; 74% of large-cap growth funds, 83% of mid-cap growth funds and 89% of small-cap growth funds outperform their benchmarks. ‘

Even within this factor taxonomy, the results were heavily skewed in favor of a small handful of stocks and away from a factor-based index.

Factor analysis firm Style Analytics noted that just 10 growth stocks accounted for around 50% of returns this year, compared to a historic norm of between 30% and 40%. While growth has historically been more concentrated than other factors such as momentum, low volatility, and quality, all have now become similarly concentrated.

Speaking ahead of Biden and Moderna’s victory and Pfizer revealing strong results for their Covid-19 vaccine trials, Lustig said T Rowe Price had already tilted funds slightly in favor of value, due to some issues of ‘Evaluation. He added that in the longer term, however, he had not anticipated an overall rotation of the previous leaders.

“The tech giants got a little overloaded, maybe they ran a little too fast, and we started to see the yield curve steepen a bit – you started to see the rates move towards 70-80 basis points. It’s not huge, but it helps the banks, which are an important component of US value, to make a little more profit on loans, ”he said.

Although lawmakers in the United States and Europe are turning to antitrust cases against tech majors, he added that it was difficult to see an immediate challenge to their market leadership.

“Some people say tech giants are like the tech bubble of 2000. That’s rubbish. Apple, Amazon, Netflix, they sit on huge piles of money, they have market caps the size of the GDP of small countries. They are everywhere now.

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