Strategic Implications of Excluding Top Growth Stocks: A Case Study of Macquarie Large Cap Growth Fund and Tesla

In the dynamic world of equity investing, the inclusion or exclusion of a single stock can significantly alter a fund's performance trajectory. The case of Macquarie Large Cap Growth Fund and its deliberate omission of Tesla (TSLA) offers a compelling case study in strategic decision-making. According to an Insider Monkey report, the fund explicitly excluded Tesla due to its failure to meet the fund's quality standards, a choice that has had measurable consequences over the past year.

The Performance Gap: A Stark Contrast

As of October 14, 2025, Tesla's stock delivered a staggering 93.94% total return over the preceding 52 weeks, closing at $429.24 per share with a market capitalization of $1.427 trillion, according to Insider Monkey. In contrast, the Macquarie Large Cap Growth Fund posted a modest 9.75% total return for the same period. This 84.19 percentage point gap underscores the strategic cost of excluding a stock that dominated growth narratives in 2025.

The fund's underperformance was further exacerbated by its benchmark, the Russell 1000 Growth Index, which outpaced its returns. While the fund's investor letter acknowledged the unfavorable market environment, it also highlighted that AI-themed stocks drove 75% of market returns during the third quarter of 2025. This raises questions about the fund's ability to adapt to sector-specific tailwinds, particularly when its exclusion of Tesla-a stock that surged 93.94% year-to-date-left a void in its portfolio.

Quality vs. Growth: A Philosophical Divide

Macquarie's decision to exclude Tesla was rooted in its investment philosophy, which prioritizes "competitively advantaged business models", according to the Macquarie fund profile. The fund's manager argued that Tesla's volatility-marked by frequent swings between top contributor and detractor status-did not align with its quality criteria. However, this approach appears to have clashed with market realities. Tesla's record vehicle deliveries (497,099 units in Q3 2025) and energy storage deployments (12.5 GWh) reinforced its position as a growth engine, even as it faced production bottlenecks, according to Tesla's Q3 2025 results.

Analysts at MarketBeat note that Tesla's stock price volatility-ranging from a 52-week low of $212.11 to a high of $488.54-reflects its dual role as a speculative and growth asset. For funds like Macquarie, which emphasize stability, this volatility may justify exclusion. Yet, as Yahoo Finance data reveals, Tesla's 52-week total return of 93.94% far outpaced the fund's 9.75%, suggesting that the market rewarded risk-taking more generously than conservative positioning.

Broader Implications for Fund Managers

The Tesla-Macquarie case highlights a critical tension in modern portfolio management: the balance between quality and growth. While Macquarie's focus on "large-capitalization, growth-oriented companies" may appeal to risk-averse investors, it risks missing out on high-conviction, high-growth opportunities. This is particularly relevant in sectors like AI and energy, where innovation-driven stocks often defy traditional quality metrics.

For fund managers, the lesson is clear: rigid adherence to quality standards can lead to strategic blind spots. Tesla's exclusion cost Macquarie a 93.94% return, a figure that dwarfs the fund's 9.75% gain. As Insider Monkey observes, the fund's cautious stance on Tesla contrasts with its embrace of AI stocks, which contributed 75% of market returns in Q3 2025. This inconsistency underscores the need for a more nuanced approach to sector allocation.

Conclusion

The performance disparity between Macquarie Large Cap Growth Fund and Tesla illustrates the high stakes of stock selection in growth-oriented portfolios. While Macquarie's exclusion of Tesla was philosophically consistent, it came at a significant financial cost. For investors, this case serves as a reminder that market dynamics often reward boldness over caution, particularly in rapidly evolving sectors. As Tesla's Q3 2025 results demonstrate, the ability to scale innovation-despite operational challenges-can generate returns that redefine industry benchmarks.

Fund managers must now grapple with a pivotal question: Can they afford to exclude high-growth stocks like Tesla in pursuit of quality, or does the market's appetite for disruptive innovation demand a recalibration of their criteria? The answer may determine whether they remain competitive in an era where growth and volatility are inextricably linked.