Small stocks again dominated the top 10 overall equity strategies in the year ended March 31, while high-yield and shorter-term bonds led the way for the top 10 overall bond strategies, according to Morningstar Inc.'s separate account/collective investment trust database.
In the equity universe, six of the top 10 equity strategies in the separate account category were in Morningstar's small-cap category, with five growth and one blend strategy.
Overall, small-cap growth was the second-highest-performing category for the first quarter of 2011, according to Adam Baranowski, a Chicago-based data analyst with Morningstar.
The median return for Morningstar's small-cap growth universe was 9.55% for the quarter, second only to technology, at 11.99%, he said.
This is a distinct indicator of the staying power of smaller stocks, according to Mr. Baranowski. He added that while Morningstar does not have a specific microcap category, five of the top 10 strategies were microcap strategies.
“I looked into the holding statistics for those microcaps and how they compared to the domestic equity (strategies) as a whole,” Mr. Baranowski said. “The average microcap exposure for those five microcaps (portfolios) was 96.28% and that's compared to 7.1% for the broad U.S. equity market and that's an average cap of $234 million compared to $20.264 billion for domestic U.S. stock.”
Three of the top 10 strategies for the year ended March 31 — those of Princeton Capital Management, Bares Capital Management Inc. and Tocqueville Asset Management LP — were also among the leaders in the year ended Dec. 31.
Princeton Capital Management's Young Enterprise Securities LLC led all equity strategies with a gross return of 72.3% for the year ended March 31. The YES strategy is a non-registered combined fund representative of many separate accounts that focus on creative developments in the physical and life sciences.
The Princeton Capital strategy ranked third in the rankings for the year ended Dec. 31.
Bares Capital's Micro-Cap Equity strategy ranked second with a one-year gross return of 63.7% as of March 31. The strategy ranked fourth overall in the previous quarter's rankings.
“The edge we can provide our investors is understanding the names in our portfolio,” said Brian Bares, chief investment officer of the Austin, Texas, firm. “We have a fairly unique investment process. The differentiators are that we're very, very concentrated; about 60% of the portfolio is in the top five names.”
Rounding out the top five equity strategies were Tocqueville Asset Management's Gold Equity strategy with a one-year gross return of 55.13%; Allianz Global Investors Capital's Ultra Micro Cap strategy with 55.03%; and Oberweis Asset Management's Concentrated Small-Cap Growth strategy, with 52.74%.
For the year ended March 31, the median separate account overall equity strategy returned 20.52%, while the Russell 3000 returned 17.41%.