Most Funds Gain Ground in Q1: Morningstar
According to mutual fund tracker Morningstar, the top performing fund group category was precious metals, which enjoyed a 35% gain (through March 27) in the midst of economic and market uncertainty.
That same uncertainty fueled a strong performance for oil-services stocks and natural-resources funds in the first quarter, a category that was up nearly 11%, making it the best-performing domestic-stock fund category in the quarter.
Small-cap value stocks continued their strong performance, rising 7.5% through March 22. Aside from the fact that smaller firms tend to flourish during economic recoveries, they also tend to have less complicated balance sheets – a real plus for investors in the post-Enron era, according to Morningstar.
Another category that seems to be benefiting from the prospects for an improved economy is real estate – a sector that was up 7.8% through March 22.
On the other hand, technology and communications funds continued their slump, dropping another 10% and 18%, respectively.
According to the report, every international equity fund category experienced an increase. Diversified emerging markets and pacific Asia/ex-Japan categories rose 14% and 12% respectively.
As for fixed income funds, emerging markets bond funds outperformed all fixed-income categories and gained 6% year to date. Many funds in this category received a boost from strong performances in favored markets such as Mexico. Meanwhile, International Monetary Fund reforms helped a few markets, like Equador, and resilient oil prices lifted Russian and Nigerian bond markets.
However, international bond funds were at the bottom of the fixed income barrel. In general, the more interest rate sensitive a government bond’s portfolio, the worse it performed during the quarter. Long-term bond funds, such as Strong Corporate Bond (SCBDX) and Alliance Bond Corporate Bond (CBFBX), performed poorly, each dropping almost 3%.
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