12 Best Large-Cap Growth ETFs

Hamna Asim
17 min read

In This Article:

In this article, we discuss 12 best large-cap growth ETFs. If you want to skip our discussion on growth investing, head over to 5 Best Large-Cap Growth ETFs. 

Large-cap growth funds focus on investing in big companies, those in the top 70% in terms of market value. Growth funds constitute companies expected to grow their revenue or earnings faster than their peers or the overall market. They are often seen as risky but can be good for investors who are not risk averse and prefer long-term investments.

Tom Hancock, who heads focused equity at GMO, joined CNBC’s ETF Edge on November 15, 2023, and remarked that the growth trade momentum is aided by the leadership of mega-cap tech companies that are embracing artificial intelligence. Similarly, Nathan Geraci, president of The ETF Store, agreed with Hancock's observation but noted that only a couple of stocks are leading the growth outperformance. In his words, Geraci commented:

“A lot of growth performance this year has been driven by the so-called Magnificent Seven, because if you look at many of the growth indices, they’re pretty top-heavy. The largest growth companies have been enough to really drive that performance differential versus value.”

Currently, US small-cap stocks are experiencing their toughest period compared to larger companies in over two decades. This reflects the investor preference for mega-cap tech stocks while smaller players grapple with inflated interest rates. According to a Financial Times report, the Russell 2000 index has seen a 24% increase since the start of 2020, significantly trailing behind the S&P 500's impressive 60% surge during the same period. This deviation from historical norms, where smaller, fast-growing companies typically offer higher returns despite higher volatility, underscores the current market dynamics. Greg Tuorto, a small-cap portfolio manager at Goldman Sachs Asset Management, pointed out the lack of significant investment in the small-cap space since 2016 or 2017, highlighting the need for increased market enthusiasm, perhaps through M&A activity or a flourishing IPO market, to reignite small-cap growth. While there are indications of the equity market expanding beyond tech giants, persistent inflation and a strong job market have led traders to accept the likelihood of higher interest rates for longer than previously anticipated. In a scenario where the Federal Reserve maintains or even raises rates, smaller companies with significant short-term or floating-rate debt, like those in the Russell 2000, are likely to be most affected.

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