Mutual Fund Returns A Mixed Bag in Q1

April 1, 2002 ( - Mutual fund returns were all over the board in the first quarter, but broadly speaking, investors had little to cheer about.

A total of 9,201 equity funds tracked by Lipper inched up an average 0.8% during the quarter, significantly lower than the 14% gain the previous quarter. US diversified stock funds, which focus on American companies of all sizes and investment styles, returned an average of just 0.35%, according to the mutual fund tracker.  

Value, Added

Returns continued to shine brightly for value funds of all sizes, while growth funds remained in their doldrums.  Small-cap value funds topped the list of US fund categories, averaging an 8.58% return for the quarter, while mid-cap value offerings were in second place, with an average return of roughly 6.0%.  Large cap value stocks gained a more modest 1.8%.  Meanwhile multi-cap growth funds slipped 3.9% on average, and small-cap growth lost 2.6%.

However, while a total of $66 billion is invested in small-cap value funds, roughly $14.5 billion is in funds that are already closed to new investors, according to Lipper.  It has become increasingly difficult for small cap fund managers to find creative ways to deploy their swollen cash flows.

Sector Selections

Industy-specific sector funds struggled to find the right targets, with an overall loss of 2.2% for the category.  Still, there was quite a bit of diversity in results by sector – telecom funds suffered a loss of 18.4%, while natural resources funds fared the best with a positive return of 11.58%, according to Lipper.

The best performing fund overall was the American Heritage fund, with a 75% return, according to CBSMarketWatch.  Of course, the fund invests in just five stocks.  On the other end of the spectrum, ProFunds Wireless, investor class, rang up the worst performance, shedding 59.2%.

Among the 25 largest funds, Lipper said the Vanguard Windsor II fared best, gaining 4.0% during the first quarter.  The Nasdaq-100 Trust, an exchange-traded fund (ETF) was worst, falling 7.1%.

During the quarter, the Dow Jones Industrial Average gained 3.8%, the Standard & Poor’s 500 Index edged down 0.06%, and the Nasdaq Composite Index tumbled 5.4%. The small-cap Russell 2000 was up 18%.

All That Glitters?

While the sector represents just $2.6 billion in overall assets, gold funds accounted for nearly half of Lipper’s list of 38 best-performing equity funds for the quarter – with seven funds returning more than 40%, as economic uncertainty drove investor interest in the precious metal.  Still, their five-year average performance of minus 4.6% annually is among the worst of all fund groups, according to Dow Jones.

Real-estate funds had another good quarter as well, rising nearly 8.25%.

Telecommunications funds were big losers in the first quarter, shedding nearly 17% of their value. Science and technology funds lost 7%, and health/biotechnology funds fell roughly 5.5%.