Small-cap growth strategies dominated the overall domestic equity rankings in the year ended June 30, edging out strategies built on real estate investment trusts, according to Morningstar Inc.'s separate account/collective investment trust database.
Eight of the top 10 equity strategies were small-cap strategies, of which seven were small-cap growth. That represents a significant upheaval from the previous two quarters, which saw real estate investment trusts dominating the top 10 overall equity strategies.
Daniel Culloton, associate director of manager research, equity strategies, at Morningstar in Chicago, said domestic small-cap growth equity strategies in general have had a very strong year.
“Managers focused on small-cap growth, particularly on microcap, and with those with a fair amount of health care — particularly biotechnology — and some technology stocks, those are the ones that have clustered up on the top,” Mr. Culloton said in an interview.
While the Russell 3000 index returned 7.3% in the year ended June 20, the Russell 2000 Growth index returned 12.3%. (The median return for the 12-month period for domestic equity managers in Morningstar's database was 6.96%.)
“If you look at the Morningstar indexes over the trailing year, growth generally has beaten value and large has tended to beat small, except in the case of small growth and midcap growth,” Mr. Culloton said.
“Some would attribute this to the fact that the Fed policy is still very loose. There's some speculation still when the Fed's going to increase rates and what effect that's going to have on a variety of markets and also equity.
“It'll be interesting to see how long growth continues to outperform value,” Mr. Culloton said. “That always inevitably switches, I can remember not so long ago that people were wondering when growth was going to outperform value, even through 2008, 2009, 2010. It's only been within recent years that growth has come to the fore.”