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Value managers gather assets while lagging growth returns

Active large-cap value fund managers saw 2.4 times the net inflows their large-cap growth peers did year-to-date Aug. 31 after having 3.7 times the net flows in 2017. Both were stark reversals from 2016 when growth managers took in a net $811 million vs. the $322 million in net outflows value managers suffered.

What makes the asset flows to growth managers notable is the relative outperformance of growth to value over the past three years. Over that period, growth outperformed value on a cumulative basis by about 25%, as measured by the Russell 1000 Growth and Value indexes, respectively. While the indexes measure passive performance, active value managers haven't fared much better, with growth managers adding value over their value peers over the past 20 months. The disparity was amplified by the first quarter's high volatility when value mangers saw assets decline via market depreciation by more than double that of growth managers.