(Valuewalk.com) If you’ve been keeping an eye on the performance of hedge funds and mutual funds over the past 12 months or so you will have noticed that one of the themes in performance that has become clear is the underperformance of funds with the highest allocation to crowded positions.
A few months ago ValueWalk reported on a research note from Bank of America, which showed that the first half of 2016 was the worst first half performance for large-cap active fund managers on record (using data going back to 2003). Just 18% of large-cap funds outperformed the Russell 1000 during the first half of the year. One of the key contributing factors to this trend is the performance of crowded stocks compared to neglected stocks. According to Bank of America’s figures, during the first half of 2016 the ten most crowded stocks in the large cap funds space lagged the ten most neglected by 18 percentage points.
