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Active Funds on Track for Record Performance in 2018

An unprecedented portion of large-cap mutual funds have beaten their benchmarks so far this year, according to Bank of America Merrill Lynch.

This could be one of the best years ever for active managers, if the performance of U.S. mutual funds is any indication.

New research from Bank of America Merrill Lynch shows that actively managed mutual funds that invest in large companies are on track for a record year of performance. Sixty percent of large-cap active funds have beaten their benchmarks over the first four months of this year – an unprecedented performance based on data tracked since 2009. The average fund outperformed its benchmark index by 18 basis points.

This strong performance amid a return of stock market volatility may bode well for stock pickers who have been trying to keep investors from moving their money to passive index funds. Actively managed mutual funds focused on growth stocks had the most success relative to passive peers this year, with a record 78 percent beating their index through April, according to the bank's research report. Value funds also fared well, with 69 percent outperforming their benchmark.

However, the bank said core funds continue to drag down performance. Only 38 percent of large-cap core funds have beaten their benchmarks over the first four months of the year despite improved results in April, according to the report.

While large-cap active funds are off to a great start in 2018, fund managers focused on mid-sized and small companies aren’t doing as well, according to Bank of America Merrill Lynch. 

Fifty-five percent of mid-cap funds outperformed during the first four months of 2018, while only 37 percent of small-cap mangers beat benchmarks over the same period, the bank’s report shows.

Investors this year have been signaling concern about the aging bull market, with Standard & Poor’s 500 index falling 1.4 percent for the year through May 2. That compares with a 22 percent rise last year, the biggest gain for the index since 2013. 

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