US growth stock funds’ winning streak came to an abrupt halt in 2025’s first quarter.
Value-oriented funds outperformed their growth counterparts, while international-stock funds fared better than their US peers. Among all equity Morningstar Categories, foreign large-value was among the top performers. Its 7.8% rise beat the foreign large-growth category’s 6.0% return and was much better than the large-value category’s 4.9% gain.
Of the nine domestic Morningstar Style Box categories, four managed to post a gain in the quarter. Small-growth funds bore the brunt of the selloff and fell 3.4%.
Tariff uncertainty, geopolitical tensions, and profit-taking weighed on the highly valued winners of recent years. Semiconductor stocks Nvidia NVDA and Broadcom AVGO fell 19% and 28%, respectively, during the quarter. Tesla TSLA fell more than 35%, while fellow “Magnificent Seven” stocks Amazon.com AMZN, Microsoft MSFT, and Alphabet GOOGL dropped at least 10% each and brought down the major indexes with them.
Caution First
Neuberger Berman Equity Income NBHAX met its goals of preserving wealth, growing capital, and providing income in the first quarter. Its 5.6% rise made it one of the top-performing large-value funds. Top holding Agnico Eagle Mines AEM gained more than 35% during the quarter, while second-largest holding International Business Machines IBM rose more than 10%.
American Century Focused Large Cap Value’s ALVIX cautious approach also fared well. Lead manager Brian Woglom creates a concentrated portfolio of just 30-50 stocks that he and his team believe have durable competitive advantages and low leverage. Top holding Johnson & Johnson JNJ soaked up 7.7% of the December 2024 portfolio’s assets and gained more than 15% in the first quarter. The second- and third-largest holdings, Medtronic MDT and Duke Energy DUK, gained 13% and 14%, respectively. A 3% position in Johnson & Johnson also helped Hartford Equity Income HQIAX, which gained 4.1% during the first period.
Other defensive-minded, valuation-aware strategies, such as BlackRock Equity Dividend MADVX and T. Rowe Price Equity Income PRFDX, benefited from owning CVS Health CVS, which gained more than 50% in the first quarter. Both funds finished in the large-value category’s top quintile.
The Funds That Fell to Earth
After five consecutive quarters of positive returns, the large-growth category got off to a shaky start this year. The typical fund fell 0.5%, and stocks that led markets higher in 2024 retreated.
Baron Partners BPTRX was among the worst-performing funds across all categories. Its exposure to Elon Musk’s businesses, which had driven the fund’s stellar performance in the past, dragged it down in the first quarter. It stashed 46% of its assets in Tesla and had more than 10% in Musk’s private companies SpaceX and X Holdings. The fund’s more than 17% decline highlighted the downside of such big bets.
A trio of Fidelity funds were among the large-growth category’s worst. Fidelity Blue Chip Growth ETF FBCG, Fidelity Growth Company FDGRX, and Fidelity OTC FOCPX all fell more than 10%. All three portfolios owned semiconductor firms Nvidia and Marvell Technology MRVL, which fell by double digits.
Small- and mid-growth funds were among the hardest hit. Cathie Wood’s ARK Innovation ETF ARKK finished the quarter down 16.3% and trailed 99% of its mid-growth category peers. Tesla was a large detractor, but so were speculative holdings such as Coinbase COIN and Block XYZ that fell more than 30%.
Amy Zhang’s Alger Small Cap Growth ALSCX fell 18.4% in the quarter and trailed 99% of its small-growth category peers. Brown Capital Management Small Company BCSIX—where Zhang had been a comanager until she joined Alger in 2015—also ranked at the bottom of the category with a 16.0% loss. Both funds owned Bio-Techne TECH and Vertex VERX, which fell more than 15% each.
International Takes Its Turn
International-stock funds got off to a hot start. The foreign large-value category posted one of the best marks of any equity fund category in the first quarter with an 11.4% gain.
Country allocations mattered, though, as the dispersion among nations was wide. The Morningstar China Index rose 14.1%, and the Morningstar Brazil Index jumped 15.5%, more than 20 percentage points more than the Morningstar India Index’s 4.7% decline. As a result, emerging-markets funds that owned more Chinese and Brazilian companies and fewer Indian firms tended to do well.
Fidelity Advisor Focused Emerging Markets FAMKX was among the biggest beneficiaries of the China rally. It had 31.7% of its portfolio’s assets in Chinese stocks at the end of 2024, over 4 percentage points more than the MSCI Emerging Market Index’s 27.5% helping. The fund’s top holding Tencent gained 20% over the quarter. Other China-based holdings, such as PDD Holdings PDD and Wuxi AppTec, posted double-digit gains as well. Lazard Emerging Markets Equity LZEMX and JOHCM Emerging Markets Opportunities JOEMX each had more than 28% of their portfolio’s assets in China at the end of 2024 and finished the quarter in the diversified emerging-markets group’s top decile.
Not all emerging-markets funds fared as well, though. Driehaus Emerging Markets Small Cap Growth’s DRESX tilt toward small, fast-growing companies worked against it. India-based holdings such as KFin Technologies, KEI Industries, and Aditya Birla Real Estate fell more than 20% each and helped pull the fund down 4.8% in the quarter.
Developed markets also took part in the international rally. The UK, Germany, and Ireland all gained more than 8% during the quarter. Indeed, funds with hefty European stakes such as T. Rowe Price International Value Equity TRIGX and JPMorgan Europe Dynamic VEUAX finished in the top decile in the foreign large-value and Europe stock categories, respectively. Both benefited from owning Roche Holding, Allianz, and Barclays, each of which posted double-digit returns.