Actively-managed mutual funds in the U.S. weren’t ready for the stock-market’s “big rally” in the first quarter, according to BofA Global Research.
The rally “caught active funds off guard,” with just 33% of large-capitalization funds beating their Russell 1000 benchmarks in the first quarter, BofA equity and quant strategists led by Savita Subramanian said in an April 4 note. That was their “worst quarterly hit rate” since the fourth quarter of 2020, they said.
The U.S. stock market rose in the first three months of 2023, including in March despite the volatility sparked by the sudden collapse of Silicon Valley Bank and Signature Bank that month. The S&P 500, a gauge of large-cap stocks in the U.S., rose 7% in the first quarter, while the technology-heavy Nasdaq Composite jumped 16.8% to score its biggest quarterly gain since the second quarter of 2020.
Beyond active mutual funds having a tough time outperforming in the first quarter, “hedge funds also struggled, especially the leaders of 2022,” the BofA strategists said. “Macro funds fell 6%, the worst hedge fund group” of the first quarter.
Macro systematic funds sank 6.7% in March for their worst monthly performance in more than five years, according to the note. These funds became the bottom-performing group among hedge funds this year, down 5.8%, after ranking as the top performers in 2022, BofA found.
U.S. stocks were trading mixed Wednesday afternoon as investors digested fresh economic data that included an ADP report showing weaker-than-expected growth in private-sector jobs in March. The Dow Jones Industrial Average
DJIA,
was up 0.3%, while the S&P 500
SPX,
fell 0.3% and the Nasdaq
COMP,
shed 1.2%, according to FactSet data, at last check.
Value stocks were outperforming growth equities in Wednesday afternoon trade, with the Russell 1000 Value index
RLV,
up 0.1% while the Russell 1000 Growth index
RLG,
dropped 1.1%, FactSet data show, at last check.
But growth stocks trounced value in the first quarter. The Russell 1000 Growth index soared 14.1% over the first three months of 2023 to surpass the Russell 1000 Value index’s 6.2% gain, according to FactSet data.
Read: ‘Slim majority’ of actively-managed U.S. large-cap equity mutual funds fail to beat S&P 500 in 2022