MMLG's Underperformance: Why Multi-Manager ETFs Struggle in Growth Markets

Growth ETFs have long been celebrated for their resilience in volatile markets, leveraging rebalancing and diversification to weather cyclical shifts. However, the First Trust Multi-Manager Large Growth ETF (MMLG)—which pools resources under two sub-advisors, Wellington Management and Sands Capital—has lagged behind its single-manager peers like VUG (Vanguard Growth ETF) and QQQM (Invesco NASDAQ 100 ETF) over the past year. This raises critical questions about the efficacy of multi-manager strategies in an era where agility and focus are paramount.

The Numbers Tell a Story of Underperformance

As of June 2025, MMLG has returned 18.16% over the past 12 months, while VUG and QQQM delivered 32.69% and 25.68%, respectively. Even against the S&P 500's 13.05% return, MMLG's margin of victory is razor-thin. Over three years, the gap widens further: VUG's 24.61% annualized return outpaces MMLG's 17.33%, underscoring a structural disadvantage.

Multi-Manager Models: A Liability in Fast-Moving Markets?

MMLG's reliance on two sub-advisors—Wellington and Sands Capital—creates a bottleneck in decision-making. While multi-manager structures theoretically diversify expertise, they often slow response times to market shifts. In contrast, single-manager ETFs like VUG and QQQM benefit from streamlined governance, enabling quicker portfolio adjustments to sector rotations.

Consider sector dynamics:
- Technology stocks, which dominate growth indices, surged by +55.01% in 2023 (QQQM's best year) but faced corrections in early 2025.
- Financials, excluded from QQQM's NASDAQ 100 focus, underperformed growth sectors but added ballast to VUG's broader exposure.

MMLG's managers, split between growth and value tilts, may have struggled to align their strategies with tech's erratic trajectory. This is reflected in its -10.43% monthly drop in March 2025, a swing absent in the more nimble VUG and QQQM.

The Russell 1000 Growth Index: A Mirror of MMLG's Limits

MMLG claims to track the Russell 1000 Growth Index, yet its correlation with the benchmark lags behind VUG and QQQM. Over three years, VUG's correlation of 98% versus the index highlights its precision, while MMLG's 92% correlation suggests dilution from sub-advisors' divergent styles.

Rebalancing: A Double-Edged Sword for Multi-Manager ETFs

Proponents of multi-manager ETFs argue that rebalancing mitigates risk. However, MMLG's 0.85% expense ratio—more than double VUG's 0.04%—eats into returns, especially during periods of low volatility. Meanwhile, its risk metrics (Sharpe ratio of 0.49 vs. VUG's 0.64) reveal higher volatility-adjusted underperformance.

The Case for Streamlined Strategies in Growth Markets

The data paints a clear picture: single-manager ETFs excel in growth environments due to their:
1. Focus: VUG and QQQM prioritize sector-specific strengths (e.g., tech dominance for QQQM).
2. Cost Efficiency: Lower fees leave more capital to compound.
3. Agility: Centralized decision-making adapts faster to market signals.

In 2024, tech's rebound drove QQQM's 25.68% return, while VUG's broader exposure softened the blow during March 2025's tech sell-off. MMLG, caught between growth and value allegiances, underdelivered in both phases.

Investment Takeaways: Time to Reassess MMLG's Role

• Avoid MMLG for growth exposure: Its structural inefficiencies and higher costs make it less competitive than VUG or QQQM.
• Opt for VUG for balanced growth: Its low fees, broad diversification, and tight correlation to benchmarks offer superior risk-adjusted returns.
• QQQM for tech-centric bets: Its 0.15% expense ratio and NASDAQ 100 focus suit investors betting on AI and semiconductors.

Final Word: Structure Matters in Growth Markets

While growth ETFs remain vital to portfolios, their success hinges on execution. MMLG's underperformance signals that multi-manager complexity may outweigh its benefits in fast-paced growth sectors. Investors seeking resilience should prioritize streamlined strategies that marry cost efficiency with market agility.