Midcap growth funds strategies dominated the list of the top 10 performing U.S. equity funds portfolios for 2007 with returns generally buoyed by investments in the energy and industrials sectors.
Coming in at the top was Driehaus Capital Management LLC with its midcap growth portfolio returning a whopping 74.4% for the year, according to Chicago-based Morningstar Inc.'s Separate Account/Com-mingled Fund Data-base. Harman Investment Advisors Inc. came in second with a return of 71.89% for the core equity composite and Cupps Capital Management LLC ranked third with a 53.97% return for the midcap growth portfolio. All three firms are based in Chicago.
The median manager returned 6.34% for the year ended Dec. 31. The Russell 3000, by comparison, returned 5.1% for the year, while the Russell Midcap Growth index returned 11.43%.
Five of the top 10 funds were midcap growth strategies, Harman's is a midcap blend, two were small-cap growth and two were energy funds. This is a turnaround from is a turnaround from year-end 2006, when real estate securities portfolios largely ruled.
Growth managers spent a good part of 2007 “waiting for the shoe to drop” on value and for growth to come back into favor, said Philip Hamilton, director of marketing at Insight Capital Research & Management Inc., Walnut Creek, Calif. Growth was undervalued going into 2007. Meanwhile, value managers, which often have exposure to financials, were pummeled in the subprime crisis and ensuing market turmoil.
Insight, a bottom-up stock picker, landed in the fourth and sixth slots of the top 10 for the year with its midcap growth strategy returning 53.3% and the tax-advantage growth strategy, a multicap portfolio, returning 48.8%, respectively. For Insight, niche plays in the consumer discretionary space worked well with an investment in Priceline.com Inc., returning 125% for the year for the midcap growth portfolio, said Mr. Hamilton.
Rounding out the top 10 are the Orleans Energy Opportunities strategy, run by Orleans Capital Management, Mandeville, La., with one-year returns of 53.1%; the midcap core growth approach of American Century Investments, Kansas City, Mo., 47.2%; New York-based BlackRock Inc.'s all-cap energy, 44.7%; Columbus Circle Investors', Stamford, Conn., small-cap growth, 43.5%; and Driehaus small-cap growth, 42.3%.