The stock market's retreat over the past three weeks has eroded the value of mutual funds, the vast majority of which posted negative returns for investors for the quarter.
NEW YORK — The stock market’s retreat over the past three weeks has eroded the value of mutual funds, the vast majority of which posted negative returns for investors for the quarter, according to a preliminary survey released yesterday by mutual-fund watcher Lipper.
U.S. diversified equity funds — the most common mutual funds found in 401(k) and other savings plans, with more than $3 trillion in assets — posted an average 3 percent negative return for the first quarter, Lipper said.
Growth funds, which incorporate riskier stocks than core or value funds, saw the worst returns. Small-cap growth funds had a negative return of 5.27 percent, followed by large-cap growth funds’ 5.18 percent negative returns. Only specialty diversified funds, usually those which invest using religious or ethical philosophies, saw a positive return, averaging 4.37 percent. The 127 specialty funds in the survey account for just $14.8 billion in assets, Lipper said.
Sector equity funds had an average 4.83 percent negative return on the $196 billion under management. With the technology-focused Nasdaq composite index having lagged the rest of the market considerably, it’s no surprise that the worst sector performers were technology funds, with a 9.39 percent negative return, and telecommunications funds, with a 7.55 percent negative return.
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The only sector funds with positive returns benefited from skyrocketing oil prices in the quarter, which hit record highs this month. Natural-resources funds, which include oil companies, had positive returns of 11.25 percent, while utility funds saw returns of 1.58 percent.
Investors who went overseas for returns fared modestly better, though world equity funds, on the whole, saw negative returns of 0.24 percent for the quarter. The best performers in world equity funds, which have $741 billion in net assets, were international small and mid-cap value funds, with a 3.84 percent positive return, followed by international small and mid-cap growth funds with a 3 percent return.
Most other equity funds saw negative returns for the quarter, with gold-oriented funds faring the worst, turning in a negative return of 5 percent. Global large-cap growth funds, like their U.S. counterparts, also fared poorly, with an average negative return of 3.18 percent.
Funds focusing on the Pacific Rim, Latin America, Europe and emerging markets all saw modest returns, while funds based on equities from Japan and China had negative returns for the quarter. Economic growth in Japan has stalled, while China’s currency is pegged to the U.S. dollar, which fell to historic lows during the quarter.
Of the top five performing individual funds for the quarter, two were funds specifically designed to ride out bear markets and two were oil and natural-resource funds. ProFunds’ Energy fund led all mutual funds with a 22.85 percent return, followed by Rydex Dynamic Funds Venture 100 bear market fund with a 21.1 percent return. ProFunds’ UltraShort OTC bear market fund posted a 20.85 percent return, U.S. Global Investors Global Resources fund had a 19.12 percent return and Oppenheimer’s Real Asset A total return fund had an 18.98 percent return.
The worst performers were diversified equity funds and technology focused funds.
ProFunds’ Internet fund saw the worst performance, with a 29.07 percent negative return, followed by Ameritor Investment’s small-cap growth fund with a 27.27 percent return. The Apex Mid Cap Growth Fund had negative returns of 26.82 percent, the small-cap growth-focused Reynolds Fund had a 22.14 percent negative return and the Amerindo Technology Fund had a negative return of 21.32 percent.
The first quarter ends on Thursday. Lipper said it will release final results for the quarter on Friday.
Because U.S. financial markets were closed yesterday for the Good Friday holiday, there are no stock or mutual-fund listings in today’s Business section. End-of-week stock and fund listings ran in yesterday’s section.