The market's biggest stock-pickers quietly had their best quarter since the financial crisis as coronavirus caused historic turmoil

Reuters / Brendan McDermid
  • Nearly 60% of all large-cap stock pickers bested their Russell 1000 benchmarks in the first quarter, Bank of America analysts said Friday, the best outperformance rate since the financial crisis.
  • The managers’ wins came amid the worst first quarter for equities in history.
  • Managers focusing on large-cap growth stocks had the most winners in the period, with 64% of pickers outperforming the Russell 1000 Growth index.
  • Historically indiscriminate selling through the three-month period created an “abundant alpha opportunity” for active stock pickers, the team led by Savita Subramanian wrote in a note to clients.
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Despite stocks’ worst first quarter in history, more than half of all large-cap fund managers beat the market.

Nearly 60% of all large-cap managers beat their Russell 1000 benchmarks during the turbulent quarter, Bank of America analysts said Friday, the best outperformance rate since the 2008 financial crisis. The average fund sank 19.5%, while the broad index tumbled 20.2%.

The group of managers focusing on growth stocks had the most winners through the first quarter, with 64% outperforming the corresponding Russell 1000 Growth Index. Value managers had the smallest proportion of winners and posted an average return slightly below the related index.

The average core fund beat its Russell 1000 equivalent by less than one percentage point, according to Bank of America. The Russell index is used as a broad market tracker and holds the largest 1,000 US companies by market cap.

BofABank of America

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Selling through the first three months of the year was the most indiscriminate in history, the team led by Savita Subramanian, creating “abundant alpha opportunity” for active stock pickers. Managers can also enjoy outsized diversification in which sectors to pick from, “given the uniform penalty for stocks during the sell-off,” they added.

Small- and mid-cap pickers fared worse amid the coronavirus-induced volatility. Their outperformance rates were 43% and 44%, respectively, though growth managers outperformed in both categories, according to the bank.

Nearly all risk markets slipped through March as mounting coronavirus risks and strict containment measures drove mass rushing to cash and calls for near-term recession. Equities have since rebounded from late March lows as investors buy stocks at low prices and governments issue trillions of dollars in stimulus to avoid economic disaster.

Major US indexes rallied through Monday’s session by roughly 5.5% on news of the virus’s death toll slowing in Europe and the US.

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