- The U.S. Large Cap Blend asset class has generated a compounded annual growth rate (CAGR) of 10.15% over the last 47 years
- The U.S. Large Cap Blend category is the most popular equity asset class
- There are 150 ETFs available in this asset class
- Of those 150 ETFs 27 have been available for 10-years or longer
U.S. Large Cap Blend: January 1972 – January 2019
Source: https://www.portfoliovisualizer.com/
There are many good reasons that the U.S. Large Cap Blend asset class is the most popular equity asset class. First and foremost, it has been very profitable. This asset class has compounded at 10.15% over the last 47 years. Also, the United States is one of the most productive countries in the world. The U.S. makes up about 25% of the GWP (gross world product) with only about 4.4% of the world population. This asset class contains over 500 of the largest companies from the country with the largest gross domestic product. Therefore, it makes a lot of sense that most market participants want this asset class in their portfolio. Due to its’ popularity, there are no shortage of funds that track this index or use it as their benchmark. Many funds that go by different names find themselves in this category. You will find funds with titles such as “S&P 500”, “Buy Backs”, “Total Stock Market”, “ESG” or “Quality”; but due to their heavy weightings in large cap blend stocks, they are categorized as large cap blend funds.
There are currently 150 ETFs in the U.S. Large Cap Blend category. Twenty-seven of these funds have been available for 10-years or longer. In the following chart, I have ranked all 27 of these funds in order by long-term performance. Performance was the only metric used in this ranking. I did not consider quality, investor suitability, valuations, commissions, liquidity, diversification or short-term returns. Investors should perform their own due diligence prior to selecting a fund to invest in.
Source: https://www.morningstar.com/ 2/18/2019
The four U.S. Large Cap Blend ETFs with the best long-term performance were FTCS, PKW, RSP and JKD. Although these 4 ETFs are all considered Large Cap Blend funds, their indexes are very different. FTCS follows a rather complicated index of companies selected from the S&P 500 and it comes with a high expense ratio of 0.61% and a very high turnover rate of 85%. PKW follows an index of companies that have been buying back their own shares. RSP follows an index of all the companies in the S&P 500, but it is equally weighted instead of utilizing capitalization weighting. JKD follows an index of U.S. Large Cap companies that are selected using proprietary Morningstar methodology. The following charts will demonstrate how these funds have performed since January 2007 and back to their inception dates.
FTCS vs PKW vs RSP vs JKD: January 2007 – January 2019
Source: https://www.portfoliovisualizer.com/
FTCS vs PKW vs RSP vs JKD vs SPY: December 20, 2006 – February 18, 2019
Source: https://www.koyfin.com/home
FTCS vs SPY: July 11, 2006 – February 18, 2019
Source: https://www.koyfin.com/home
PKW vs SPY: December 20, 2006 – February 18, 2019
Source: https://www.koyfin.com/home
RSP vs SPY: April 30, 2003 – February 18, 2019
Source: https://www.koyfin.com/home
JKD vs SPY: July 2, 2004 – February 18, 2019
Source: https://www.koyfin.com/home
Why is RSP ranked above JKD?
RSP vs JKD vs SPY: July 2, 2004 – February 18, 2019
Source: https://www.koyfin.com/home
Now that we’ve seen the past performance of these top performing U.S. Large Cap Blend funds, let’s look at their issuer’s stated objectives and strategies.
FTCS – The First Trust Capital Strength ETF seeks investment results that correspond generally to the price and yield (before the fund’s fees and expenses) of an equity index called The Capital Strength IndexSM. From the stocks in the NASDAQ US Benchmark Index, the largest 500 companies with a minimum three-month average daily dollar trading volume of $5 million are selected. To be eligible for inclusion in the index, companies must have: at least $1 billion in cash or short-term investments, a long-term debt to market cap ratio less than 30%, a return on equity greater than 15%. Eligible companies are then ranked by a combined short-term (3-month) and long-term (1-year) realized volatility. The 50 companies with the lowest combined volatility score are selected for inclusion in the index. A maximum weight of 30% in any one Industry Classification Benchmark industry is allowed. If an industry has a weight greater than 30%, the highest-ranking security by volatility will be removed and replaced with the next eligible security from a different industry. This process is repeated until no industry has a weight greater than 30%. The index stocks are equally weighted initially and on each rebalancing effective date. The index is reconstituted and rebalanced on a quarterly basis. (BEST LONG-TERM PERFORMANCE, LOWEST MARKET CORRELATION)
PKW – The Invesco BuyBack Achievers™ ETF (Fund) is based on the NASDAQ US BuyBack Achievers™ Index (Index). The Fund will normally invest at least 90% of its total assets in common stocks that comprise the Index. The Index is designed to track the performance of companies that meet the requirements to be classified as BuyBack Achievers™. The NASDAQ US BuyBack Achievers Index is comprised of US securities issued by corporations that have effected a net reduction in shares outstanding of 5% or more in the trailing 12 months. The Fund and the Index are reconstituted annually in January and rebalanced quarterly in January, April, July and October. (BEST SINGLE-YEAR PERFORMANCE, LOWEST P/E RATIO)
RSP – The Invesco S&P 500® Equal Weight ETF (the “Fund”) seeks to track the investment results (before fees and expenses) of the S&P 500® Equal Weight Index (the “Underlying Index”). The Fund will invest at least 90% of its total assets in securities that comprise the Index. The Index equally weights the stocks in the S&P 500® Index. The Fund and the Index are rebalanced quarterly. (BEST 10-YEAR & 15-YEAR PERFORMANCE, LARGEST AUM, LOWEST P/B RATIO, MOST DIVERSIFIED, LOW EXPENSE RATIO)
JKD – The iShares Morningstar Large-Cap ETF seeks to track the investment results of an index composed of large-capitalization U.S. equities. Exposure to large, established U.S. companies. Access to a specific segment of the domestic stock market. Use to seek long-term growth in your portfolio. (LOWEST DRAWDOWN DURING LAST RECESSION, HIGHEST DIVIDEND, LOW EXPENSE RATIO, LOWEST VOLATILITY)
The U.S. Large Cap Blend asset class has a long history of great investment returns. To easily receive the same returns that this index produces, all an investor has to do is select a low expense ratio S&P 500 fund or a U.S. Total Stock Market fund. If you are seeking the potential of additional alpha in this asset class, investors should consider one of the top 4 performing funds in this category. Either way, I believe investors will be satisfied with the performance of most ETFs available in this category.
Thank you for taking time to read this article. If you found it useful, please share it with a friend.
Respectfully yours, Micah McDonald, aka the Deep Value ETF Accumulator
Disclosure: We own shares of FTCS, and we intend to buy more shares in the future. I am not a professional investment advisor. Please perform your own due diligence or seek assistance from a Registered Investment Advisor prior to investing in any fund mentioned in this article.
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