Think small and think with energy.
Once again, the top performing equity managers were powered by energy stocks and small-cap companies for the one-year period ended March 31, and a number of portfolio managers on these strategies expect the run to continue through the remainder of the year.
Seven out of the top 10 performing strategies in the Morningstar Inc. Separate Account/Commingled Fund Database over the last year were small-cap portfolios, while three were energy and natural resource-based strategies.
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Leading the pack was Ironwood Capital Management, Boston, whose concentrated small-cap value strategy posted a 77.7% return, tops for the year.
In contrast, the median manager in the database returned 18.1% for the period, while the Russell 3000 index produced 14.3%.
Behind Ironwood was Insight Capital Research & Management, Walnut Creek, Calif., whose small-cap growth strategy returned 64.8% over the one-year period; and New York-based BlackRock Inc., whose all-cap energy strategy returned 53.6%.
Chicago-based Cupps Capital Management LLC's small-cap growth strategy followed with a 53.2% return, while another BlackRock strategy, small-cap energy, produced a 51.9% return. Wells Capital Management, San Francisco, followed in sixth place with a 49.5% return for the year in its small-cap growth strategy.
For the three previous quarters, the energy strategies of Wellington Management Co., Boston, and The Mitchell Group Inc., Houston, had ranked first and second, respectively, in the Morningstar database. Wellington is in the process of realigning several of its investment strategies and did not submit its energy strategy to Morningstar for the March 31 periods. The Mitchell Group's publicly traded energy strategy returned 32.3% for the 12 months, outperforming the Russell 3000, yet not enough to land the firm in the top 10.
While the energy sector provided a boost to many of the top performing strategies, portfolio managers said that ultimately their performance was the result of picking the right companies within the sector.