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Money Managers See Value in Large-Caps

Large-cap exchange-traded funds, which tend to be more defensive than small and medium-sized company exchange-traded funds, have suffered their fair share this year.

The iShares Morningstar Large Core Index (JKD), iShares S&P 500 Index (IVV), Vanguard Large Cap ETF (VV) and the iShares Dow Jones U.S. Index (IYY) have declined 35.6%, 39.3%, 41.2% and 41.8% this year, respectively. These results are in line with the minus 41% average return by large-blend mutual funds tracked by Morningstar.

Some money managers are favoring large-caps. "It's a good time to be in large-caps versus small-caps right now," said Kelly Campbell, founder and principal of Campbell Wealth Management. "They are net creditors versus being net debtors."

Campbell's largest positions have been in large-cap equities. As of Oct. 23, he had a portfolio that included a 16% allocation in large-cap growth stocks, 16% in large-cap value and 12% in large-cap foreign equities. "If I am going to be in the stock market at all right now, I want to be in large-caps," he said. "When the market turns around, small-caps may begin to outperform large-caps, but it's not happening yet."

A couple of benefits to ETFs are lower taxes and access to a wide array of asset classes. "ETFs can do in-kind transactions, which are a significant advantage," he said. "You can also use ETFs to get into a lot of types of non-traditional investments, which can reduce the correlation of your returns to the overall stock market."

Rafael Resendes, portfolio manager of the Toreador Large Cap Fund (TORLX) and co-founder of the Web site, agrees with Campbell on the attractiveness of large-cap equities. "Over time, large-cap stocks have proven to be less risky than small-cap stocks," he said. "They offer a higher degree of safety as well as the benefit of higher returns than fixed-income investments."
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JKD $120.54 0.00%
IVV $207.46 0.00%
IYY $103.02 0.00%
VV $94.42 0.00%
XLF $23.31 0.00%


Chart of I:DJI
DOW 17,773.64 -57.12 -0.32%
S&P 500 2,065.30 -10.51 -0.51%
NASDAQ 4,775.3580 -29.9330 -0.62%

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