For the largest US stock funds, the recipe for success in the second quarter of 2024 again consisted of fast-growing companies and the largest stocks.
The quarter was also particularly strong for the 10 largest passive US stock funds. All of them ranked in the top half of their Morningstar categories, and seven posted returns strong enough to qualify for the top 25%. These trends came as the US Large Growth Index returned 4.73% and the US Large Value Index lost 0.59% in the quarter. Meanwhile, the overall market as measured by the US Market Index returned 3.48%%.
“In the second quarter, you could draw a straight line from small-value underperformance to large-growth outperformance,” says Bryan Armour, director of passive strategies research for North America at Morningstar. “Big growth stocks have ruled the quarter, particularly in tech and communications sectors.”
Here’s a look at how the largest active US stock funds—both actively and passively managed—performed in the second quarter of 2024. Performance data for this article was based on the lowest-cost share class for each fund. Some funds may be listed with share classes not accessible to individual investors outside retirement plans. The individual investor versions of those funds may carry higher fees, which reduces returns to shareholders.
Largest Actively Managed US Stock Funds Q2 Performance
Looking at the 10 largest actively managed US stock funds, their performance varied within their respective categories. At one end of the spectrum was the $86.5 billion American Funds AMCAP RAFGX, whose 2.5% return in the quarter landed it in the 77th percentile within the large growth category. At the other end was the $97.6 billion American Funds American Mutual RMFGX, whose 7.7% gain put it in the 15th percentile of the large value category.
American Mutual has “done well because of tech picks such as Apple AAPL, Broadcom AVGO, and Microsoft MSFT, and aerospace industrials such as RTX RTX and GE Aerospace GE,” says Stephen Welch, senior manager research analyst, equity strategies at Morningstar. With its tech holdings, American Mutual is more tilted toward growth stocks than the average large-value fund.
AMCAP, meanwhile, has “done poorly because it’s light on technology relative to the index, particularly Nvidia NVDA, and its picks within the sector haven’t been good, like Salesforce CRM,” Welch says. While it’s still decidedly in the large growth section of the Morningstar Style Box, AMCAP is less growth-oriented than its average category peer. Notably, only 1.3% of its portfolio was Nvidia, compared with that stock’s 10.8% share of the US Large-Mid Cap Broad Growth Index—a significant underweighting. Nvidia has been a tremendous success, rising 36.7% over the quarter.
The runaway performance of semiconductor chip stocks also propelled strong returns for the $76.1 billion Vanguard Primecap VPMAX, which recently reopened after 20 years of limited new investments. Primecap’s 4.7% return during the quarter ranked it in the 7th percentile of its category. “A key contributor to this performance was the fund’s roughly 15% stake in semiconductors—among the largest of any fund in the large-blend category,” says Morningstar strategist Robby Greengold. “Through June 20, the industry group was the market’s best performer, gaining 29.0% on average versus the S&P 500′s 4.5%.” He notes that not all their picks within that sector excelled. Primecap also underweighted Nvidia and overweighted Intel INTC, which fell by 30%
Largest Passively Managed US Stock Funds Q2 Performance
All the largest stock index funds posted better-than-average returns than their peers, with seven of the 10 biggest funds ranking in the top quartile of their categories. The $1.6 trillion Vanguard Total Stock Market Index VSTSX saw the softest performance in this group. The fund’s 3.3% return in the quarter put it in the 47th percentile of the large blend category. The fund includes small-, mid-, and large-cap stocks, unlike the second-largest fund, the $1.1 trillion Vanguard 500 Index Fund VFFSX, which returned 4.3% for the quarter, putting it in the 21st percentile in the large blend category.
“The exclusion of small caps has been a boon for large-cap-focused funds like iShares Core S&P 500 ETF IVV, SPDR S&P 500 ETF Trust SPY, and Vanguard S&P 500 ETF VOO. Large-cap stocks outperformed small caps over the past five years,” says Morningstar associate manager research analyst Mo’ath Almahasneh.
Index funds did well because of that outperformance. Armour says, “The main reason index funds have outperformed active managers is market-cap weighting, which holds proportionally higher weights in bigger stocks.”
Largest Active US Stock Funds Long-Term Performance
The top performer among the largest stock funds for the last three years has been the $145 billion American Funds Investment Company of America RICGX, which landed in the 7th percentile. Over the past five years, the best performer was the $85 billion JPMorgan Large Cap Growth JLGMX, which was in the 6th percentile. The fund that ranked highest in the second quarter, Vanguard Primecap, was in the 39th percentile of its category in the last three years and the 16th percentile over the past five.
*Before its May 2, 2022 share class inception, DOXGX performance is based on older share class DODGX.
Largest Passive US Stock Funds Long-Term Performance
Eight of the 10 largest index funds ranked in the top quartile of their categories over the past three years, and seven did so over the past five years. The $289.9 billion Invesco QQQ Trust QQQ, was the highest-ranked index fund in its category over both three- and five-year trailing periods. It was in the 8th percentile over the last three years and the 3rd percentile over the last five. It was also the highest-performing fund in terms of returns, bringing in a 21.52% annualized return over the past five years.
