Large-cap aggressive growth equity managers, long the outcasts of the style box set, say they finally may get a warmer reception — and more mandates — from institutional investors this year.
Since the Federal Reserve Board stopped raising rates on Aug. 8, there has been "a defining change in market leadership," said Robert G. Hagstrom, portfolio manager of Baltimore-based Legg Mason Capital Management's $5 billion large-cap growth equity strategy. The "offensive" side of the market — including consumer discretionary, technology and Internet stocks — has woken up, while defensive sectors such as energy, materials and utilities have stopped working, he said.
A slower, but stable, economy and lowered inflationary expectations are providing a beneficial environment for growth stocks this year, agreed Mark Baribeau, a portfolio manager of Boston-based Loomis Sayles & Co.'s $12 billion large-cap growth strategy.
If growth stocks finally take the spotlight, it will be after a fairly dark period. In 2006, "most active managers had an absolutely terrible year compared to the indices," said Alan D. Biller, president of Alan D. Biller & Associates Inc., a Menlo Park, Calif., investment consultant.
Less than 20% of the 225 large-cap growth managers in the database of Atlanta-based research firm eVestment Alliance and only 5% of those covered by New York-based Lipper Inc. managed to outperform the Russell 1000 Growth index last year, noted Janice Fritz-Snyder, head of U.S. equity with Watson Wyatt Worldwide, New York.