Q3 Funds Performance Focused on Value

November 3, 2004 (PLANSPONSOR.com) - The name of the game in mutual funds during the third quarter was the value investing approach, according to a Mercer Investment Consulting analysis.

A Mercer news release said its third-quarter 2004 Defined Contribution Universe Summary found that large-cap value funds were flat during the July to September period, compared to a loss of 4.5% for the median large-cap growth fund. Further, the small-cap segment of the market followed the same trend as large-cap stocks, as the median small-cap value fund outperformed the median small-cap growth fund by a margin of 4.8%.

According to Mercer, the median large-cap fund slightly underperformed the S&P 500 Index for the third quarter by 10 basis points, while lagging the index by 90 basis points, compared to the preceding year. Small-cap core funds outperformed their large-cap counterparts for the quarter, continuing a multiyear trend. The median small-cap fund lost 1.7% for the quarter versus 2% for the median large-cap fund.

Mercer analysts said performance in the small-cap asset class has strengthened compared to large-cap equities throughout 2003 and early 2004. However, recent trends have weakened and given investors a moment to contemplate their future investment strategy.

The international asset class outperformed US equities for the quarter although the asset class sustained a loss of 0.3% and outperformed its US large-cap counterpart by a margin of 8.1% over the last year.