Mutual funds have continued their positive performance in 2018, with 56% of large-cap mutual funds outperforming year to date. If this pace continues it will be the best year for mutual funds since 2007.
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The best returns for mutual funds have been in the information technology, consumer discretionary and energy sectors. In discussing funds’ performance, Goldman Sachs noted that they are bullish on the energy sector for the first time since at least 2012, with funds shifting to bullish (Overweight) on the energy sector for the first time since at least 2012.
Energy prices have soared this year, with U.S. crude oil climbing above $70 a barrel. Retail gasoline prices have also jumped – and are near $3 a gallon in the U.S.
Although mutual funds are positive on the tech sector, with an Overweight rating, they reduced their relative allocation to the sector to the lowest on record.
Goldman noted that fund allocations to the tech sector could decline further following the creation of the communication services sector.
The best-performing mutual funds have witnessed investor inﬂows this year, with large-cap funds that beat their benchmarks by more than 1% in 2017 witnessing inﬂows of $10 million or more during 1Q vs. $3 million of outﬂows for the median fund. These funds are mostly overweight tech and increased allocation to tech and energy in 1Q.
Large-cap mutual funds increased their allocation most to consumer staples and financials during 1Q. On the other hand, the average fund reduced its allocation to information technology to the lowest since at least 2012. Despite the decline, funds remain Overweight tech, second only to financials.