Mutual funds with concentrated holdings outperformed non-concentrated funds over the last 10 years, according to an S&P study. As of March 31, the average 10-year annualized return for the concentrated funds was 9.29%, while non-concentrated funds returned 8.31%, according to the Standard & Poors study of 397 domestic equity mutual funds. The concentrated funds outperformed in all style categories except midcap value and midcap growth.
The study examined mutual funds with at least $50 million in net assets, at least 10 years of operating history, and management tenure of greater than five years. Concentrated funds had top 10 holdings accounting for at least 30% of the funds total assets, resulting in 140 funds spread out over all nine investment style categories.
The concentrated funds tend to be more volatile than non-concentrated funds, the study noted, but "concentrated funds provide better reward relative to the risk they incur.