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The Large-Cap Growth style ranks fifth out of the 12 fund styles as detailed in our Q3’19 Style Ratings for ETFs and Mutual Funds report. Last quarter, the Large-Cap Growth style ranked sixth. It gets our Neutral rating, which is based on an aggregation of ratings of 24 ETFs and 675 mutual funds in the Large-Cap Growth style. See a recap of our Q2’19 Style Ratings here.
Figures 1 and 2 show the five best and worst rated ETFs and mutual funds in the style. Not all Large-Cap Growth style ETFs and mutual funds are created the same. The number of holdings varies widely (from 21 to 576). This variation creates drastically different investment implications and, therefore, ratings.
Investors seeking exposure to the Large-Cap Growth style should buy one of the Attractive-or-better rated ETFs or mutual funds from Figures 1 and 2.
Our Robo-Analyst technology[1] empowers our unique ETF and mutual fund rating methodology, which leverages our rigorous analysis of each fund’s holdings.[2] We think advisors and investors focused on prudent investment decisions should include analysis of fund holdings in their research process for ETFs and mutual funds.
Figure 1: ETFs with the Best and Worst Ratings – Top 5
* Best ETFs exclude ETFs with TNAs less than $100 million for inadequate liquidity.Sources: New Constructs, LLC and company filings
Five ETFs (VSDA, JQUA, BERN, SYG, OQAL) are excluded from Figure 1 because their total net assets (TNA) are below $100 million and do not meet our liquidity minimums.
Figure 2: Mutual Funds with the Best and Worst Ratings – Top 5
* Best mutual funds exclude funds with TNAs less than $100 million for inadequate liquidity.Sources: New Constructs, LLC and company filings
Invesco Dynamic Large-Cap Growth ETF (PWB) is the top-rated Large-Cap Growth ETF and Fidelity SAI U.S. Quality Index Fund (FUQIX) is the top-rated Large-Cap Growth mutual fund. PWB earns an Attractive rating and FUQIX earns a Very Attractive rating.
ClearBridge Large-Cap Growth ESG ETF (LRGE) is the worst rated Large-Cap Growth ETF and PACE Large Company Growth Equity Investments (PLAAX) is the worst rated Large-Cap Growth mutual fund. LRGE earns a Neutral rating and PLAAX earns a Very Unattractive rating.
The Danger Within
Buying a fund without analyzing its holdings is like buying a stock without analyzing its business and finances. Put another way, research on fund holdings is necessary due diligence because a fund’s performance is only as good as its holdings’ performance. Don’t just take our word for it, see what Barron’s says on this matter.
Performance of Holdings = Performance of Fund
Analyzing each holding within funds is no small task. Our Robo-Analyst technology enables us to perform this diligence with scale and provide the research needed to fulfill the fiduciary duty of care. More of the biggest names in the financial industry (see At BlackRock, Machines Are Rising Over Managers to Pick Stocks) are now embracing technology to leverage machines in the investment research process. Technology may be the only solution to the dual mandate for research: Cut costs and fulfill the fiduciary duty of care. Investors, clients, advisors and analysts deserve the latest in technology to get the diligence required to make prudent investment decisions.
Figures 3 and 4 show the rating landscape of all Large-Cap Growth ETFs and mutual funds.
Figure 3: Separating the Best ETFs from the Worst Funds
Sources: New Constructs, LLC and company filingsFigure 4: Separating the Best Mutual Funds from the Worst Funds
Sources: New Constructs, LLC and company filingsThis article originally published on July 16, 2019.
Disclosure: David Trainer and Kyle Guske II receive no compensation to write about any specific stock, style, or theme.
[1] Harvard Business School features the powerful impact of our research automation technology in the case New Constructs: Disrupting Fundamental Analysis with Robo-Analysts.
[2] This paper compares our analytics on a mega cap company to other major providers. The Appendix details exactly how we stack up.
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This paper compares our analytics on a mega cap company to other major providers. The Appendix details exactly how we stack up.
Harvard Business School featured our unique technological capabilities in “New Constructs: Disrupting Fundamental Analysis with Robo-Analysts”.
See the difference that real diligence makes.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
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