Tags: Goldman Sachs | funds | S&P 500 | large cap

Goldman Sachs: Just 23 Percent of Large-Cap Mutual Funds Beating S&P 500

By    |   Friday, 05 September 2014 12:20 PM

Many studies have shown that actively managed stock mutual funds underperform market indexes in the long term, and now you can add a study for the short term.

Goldman Sachs finds that just 23 percent of large-cap stock mutual funds have returned more than the S&P 500 index has, The Wall Street Journal reports. That compares with 37 percent for the period since 2003.

Most large-cap fund managers "will be forced to re-evaluate their portfolios or embrace the likelihood of drafting very disappointing year-end letters," says David Kostin, Goldman's chief U.S. equity strategist, according to The Journal.

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The S&P 500 has returned 8.1 percent so far this year.

So what's the problem? "Choice of shorts and market timing are the clear sources of blame," Kostin argues.

To be sure, the woes of actively managed funds should end up helping the market, he notes. That's because the underperforming fund managers will feel pressure to buy stocks to lift their returns by year-end.

"In addition to the supply/demand dynamics from underperforming funds, the environment of continuing above-trend U.S. GDP growth, strong corporate earnings and still-accommodative Fed policy should support a continuing 'grind higher' in U.S. equities."

Meanwhile, Bruce McCain, chief investment strategist for Key Private Bank, says it doesn't make sense to wait for a market correction to purchase stocks in a disciplined manner.

The key fundamentals — economic and earnings growth — bode well for stocks, he writes in an article for Forbes. "A broad range of indicators suggests the economy and earnings will continue to grow, and that should provide the basic fuel for a rally that continues to grind higher."

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Many studies have shown that actively managed stock mutual funds underperform market indexes in the long term, and now you can add a study for the short term.
Goldman Sachs, funds, S&P 500, large cap
294
2014-20-05
Friday, 05 September 2014 12:20 PM
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