How Did Institutional Stock Pickers Do Last Year?

Simply put, not well.

Even in a year seemingly tailor-made for stock pickers (you didn’t need a Harvard MBA to deduce a video conferencing company might outperform during a pandemic), most actively managed funds underperformed.

The Deets

According to data from S&P Dow Jones, 60% of U.S. large-cap stock-picking funds lagged the S&P 500 last year. The underperformance was, in a way, not surprising:

  • 2020 was the 11th consecutive year in which the majority of actively managed large-cap funds underperformed the S&P 500.
  • Of the U.S. large-cap funds that have been in business for two decades, only 6% have beaten the S&P 500.

What Happened? In the land of large caps, companies like Apple and Amazon (which together account for over 10% of the S&P 500) both had banner years in 2020. Many active managers are hesitant to have such large positions in a portfolio, thus missing out on the Bezos and Cook bonanza.

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