Fixed-Income Stalls as Small-Cap Equities Soar in Q4 2004

February 7, 2005 ( - Fixed income mutual funds saw slight gains in the fourth quarter, while small-cap equity mutual funds saw double-digit returns in the same time frame, according to Mercer Investment Consulting.

The median fixed-income core fund gained 1% on the quarter, while on the year it gained 4%, according to a news release from the company. In contrast to this mediocre return, US balanced funds saw much better returns, posting 6.1% gains in the final quarter of 2004, and 8% on the year.

The average global equity mutual fund was up a tremendous 12.4% in the final quarter, and 15.1% on the year. The average international equity fund had an even better performance, up 14.4% from September through December, and 18.7% on the year. Above all others, however, emerging markets equity funds were up 17.4% in Q4, and 25% on the year.

The median small-cap core equity fund also did well in the fourth quarter, posting 13% in this time frame and 18.8% on the year. Small-cap value did worse than small-cap growth, with the latter pulling in 12.9% and the former 13.8% on the quarter. On the year, however, the tables were reversed, with value up 20.8% and growth up 12.7%. Passive management outperformed active management for both value and growth styles, but not within the core style, according to Mercer.

The median large-cap core fund was up 9.3% in the fourth quarter, and 10.2% on the year. Value and growth large-caps both saw similar growth in the fourth quarter at 9.2% and 10%, respectively.