Investment Rating - The report indicates a strong relative performance of large-cap mutual funds, with 50% outperforming their benchmarks year-to-date, significantly above the historical average of 37% [2][12]. Core Insights - Mutual funds have shown strong performance despite a volatile macro backdrop, with inflows to large-cap mutual funds and ETFs slowing since Election Day [2][20]. - The average large-cap mutual fund's active share has declined to a 10-year low, indicating lower alpha potential compared to historical levels [3][25]. - The average large-cap mutual fund has increased exposure to Consumer Discretionary by 75 basis points, marking the largest tilt in the last decade, while reducing exposure to Financials by 45 basis points [3][49]. Performance and Flows - 50% of large-cap mutual funds have outperformed their benchmarks year-to-date, compared to 29% in 2024 and a long-term average of 37% [12]. - Cash allocations in mutual funds have increased from 1.3% at year-end 2024 to 1.5% in March 2025, reflecting heightened uncertainty [20][21]. Themes in Focus - Active share among large-cap mutual funds is near 10-year lows, suggesting reduced deviation from benchmarks and lower alpha potential [3][25]. - Mutual funds have reduced exposure to stocks most affected by China tariffs, shifting from a 1 basis point overweight to an 11 basis point underweight [3][33]. - Large-cap mutual funds were 723 basis points underweight the "Magnificent 7," contributing to their strong relative performance year-to-date [3][39]. Sector Positioning - The average large-cap mutual fund is most overweight in Financials (+177 basis points) and most underweight in Information Technology (-466 basis points) [49]. - The tilt towards Consumer Discretionary has increased significantly, primarily driven by increased positions in Tesla [3][49]. Stock Positioning - The largest mutual fund overweights have underperformed the equal-weight S&P 500 year-to-date, with a 2% return compared to 3% for the index [4]. - Mutual funds have cut ownership in each of the "Magnificent 7" stocks during the first quarter of 2025, indicating a strategic shift in positioning [3][43].