- Mutual funds are set to have their best year of performance by benchmark since 2007.
- Actively managed funds have proven useful in a year of economic uncertainty.
- Fears of a recession have caused funds with strong balance sheets to turn to stocks.
Mutual funds often get a bad rap for their high fees and mediocre performance. Longer-term, passive index funds generally have lower fees.
According to 2016 data from the Investment Company Institute, on average, mutual fund fees averaged $15,000 over 30 years, compared to $1,800 for index funds.
This year, the tables have been turned performance-wise. According to a Nov. 22 note from Goldman Sachs, special stock picks combined with higher fund allocations put mutual funds on track for their best year relative to major indexes since 2007.
According to the report, 56% of large-cap mutual funds outperformed their benchmarks, compared to 36% outperformance since 2007.
The ability to operate an actively managed fund proved valuable during a year of economic uncertainty. Rising interest rates and a slowing economy hit large tech stocks, an underweight category in the first two quarters of 2022.
As the year ended, fears of a recession sent mutual funds turning to stocks with stronger balance sheets, lower labor costs and shorter durations. This presents a pessimistic economic outlook – one that is still viable.
Below are 31 of the 50 stocks listed in the Goldman Sachs Mutual Fund Overweight Positioning Basket. As of September 30, these stocks were at least 10 basis points overweight in portfolios, with the basket median being 9.
The list also includes 10 new additions to the basket as mutual funds load: Intuitive Surgical ( ISRG ), Chipotle Mexican Grill ( CMG ), Workday Inc. ( WDAY ), M&T Bank Corp . ( MTB ), Bank of New York Mellon Corporation ( BK ), Medtronic ( MDT ), Willis Towers Watson Public ( WTW ), Constellation Energy ( CEG ), State Street Corporation ( STT ), and AES Corp. (AES).
The list is based on the investment bank’s analysis of 548 large core, growth and value mutual funds with $2.5 trillion in equity assets.