Think you know what a ‘large cap’ stock is? One definition American fund managers sometimes use is anything above $10bn (£7.7bn), which handily encompasses about 90 per cent of the S&P 500.
If that categorisation seems a bit US-centric, well, welcome to equity markets. But then again, agreement isn’t widespread. In fact, the website of Morningstar (the folks who make categorising securities and markets their job) seems to offer several definitions.
Once upon a time, the group had a periodically-revised set of market cap boundaries (or ‘breakpoints’), with ‘large’ defined as anything above $8.6bn as of 31 July 2009. Today, you’ll find Morningstar refer to large cap companies as “those in the top 5 per cent of capitalisation within their global region”, as well as those below the “giant-cap” tier. Elsewhere, the classification is broader still; Morningstar rules mean a UK-focused fund can be described as ‘large cap’ if it draws from “the top 70 per cent of the capitalisation of the equity market”.