Wall Street outlooks for 2024 suggest that investors cannot afford to be on autopilot. In a time of economic uncertainty and ongoing global challenges, it is crucial for investors to carefully select where they place their money.
Strategists warn of a challenging road ahead for the market. With ongoing conflicts, China’s attempts to revive its economy, and the Federal Reserve’s indecision on interest rates, uncertainty looms. Additionally, there are concerns about the possibility of a recession in the United States.
In light of these circumstances, Jean Boivin, head of BlackRock Investment Institute, emphasizes the need for investors to steer their portfolios more deliberately. BlackRock sees active strategies as the favorable choice for both bonds and equities in the coming year.
Over the past decade, passive strategies have gained popularity and currently account for 49% of all assets. However, active managers have a unique advantage in mitigating risk and adding value to portfolios, according to Russel Kinnel, director of ratings and manager research at Morningstar.
To identify potential active funds, we searched for U.S. large-cap managers with the highest active share. Active share measures how different a fund is from its benchmark. We focused on funds whose portfolios diverge at least 85% from their benchmarks. From this filtered list, we selected funds with a strong performance record that outperformed at least two-thirds of their peers over both the three- and five-year periods.
After thorough analysis, we identified nine active funds meeting our criteria: they are open to new investors and have assets of at least $500 million. Among these funds are well-known managers and a few under-the-radar funds.
It is essential to note that active funds, including those on this list, often come with higher costs. However, the potential benefits of actively managed investments make them worth considering for investors in 2024.
Top Funds to Consider for Your Investment Portfolio
Oakmark Select and Oakmark Investor
Two standout funds that deserve your attention are the concentrated Oakmark Select and the larger Oakmark Investor, with assets worth $5.6 billion and $18 billion respectively. These funds are both led by the experienced value investor, Bill Nygren, who has a proven track record of making savvy stock picks. With their focus on value investing, these funds offer a distinctive approach to generating returns.
Invesco Comstock Select Fund
The Invesco Comstock Select Fund comes highly recommended by experts, especially during times of market volatility. This fund excels at dialing down risk and delivers strong long-term risk-adjusted performance. Morningstar highlights that the Comstock fund primarily invests in smaller, more affordable companies compared to its peers. Despite its higher fees, it boasts an impressive average annual return of nearly 11% over the past five years, surpassing 85% of its large value competitors.
Smead Value Fund
Another fund worth considering is the Smead Value Fund. Morningstar reports that this fund consistently outperforms its peers, delivering an average annual return of almost 14% over the last three years, surpassing 99% of its competitors. The Smead Value Fund stands out for its higher allocation in consumer cyclical companies and energy sectors compared to its peers, offering a unique investment opportunity in these areas.
Dodge & Cox Stock Fund
If you are looking for a more affordable option that doesn’t compromise on quality, consider the Dodge & Cox Stock Fund. With an expense ratio of just 0.51%, this fund is one of the cheaper options available. This fund specializes in identifying strong companies that have recently faced challenges, making it an attractive choice for value investors. Morningstar recognizes the Dodge & Cox Stock Fund as one of the best large value strategies in the market today.
Marshfield Concentrated Opportunity Fund
For those seeking a less well-known but promising option, the Marshfield Concentrated Opportunity Fund is worth exploring. This fund boasts an impressive active share of 95% and has consistently outperformed 99% of its peers over the past three years. It’s important to note that although the fund has faced some challenges this year, the fund managers have significant skin in the game with at least $1 million invested in their own funds.