Big Bets Add Little Value
Big Bets Add Little Value
Do big bets automatically mean big bucks? Even as they rise in frequency, our research says no.
In recent years, big bets in equity mutual funds have surged in popularity, especially on mega-cap tech giants like Apple, Microsoft, Amazon.com, Alphabet, and Meta Platforms. But what impact do these bets really have on fund performance? We’ve found that despite many big stock bets outperforming their benchmarks, most funds with big bets still underperformed their indexes.
We’ve defined a big bet as a position that averaged 5% of portfolio assets across its lifespan while at some point reaching at least 8% of portfolio assets and 5% active weight. In this paper we explore how effective stock-pickers have been at taking such stances and how translating winning stock picks into winning portfolio performance is easier said than done.
In recent years, big bets in equity mutual funds have surged in popularity, especially on mega-cap tech giants like Apple, Microsoft, Amazon.com, Alphabet, and Meta Platforms. But what impact do these bets really have on fund performance? We’ve found that despite many big stock bets outperforming their benchmarks, most funds with big bets still underperformed their indexes.
We’ve defined a big bet as a position that averaged 5% of portfolio assets across its lifespan while at some point reaching at least 8% of portfolio assets and 5% active weight. In this paper we explore how effective stock-pickers have been at taking such stances and how translating winning stock picks into winning portfolio performance is easier said than done.
What's Inside:
What's Inside:
- An overview of the best and worst performing big bets in equity mutual funds.
Which concentrated stock funds are more likely to improve the odds of success when investing in a big bet.
How portfolio managers struggle to add value when position sizes peak.