Small Caps Loom Large in 2001

December 31, 2001 ( - It's been a bad year for US mutual funds - in fact, US diversified stock funds are down 10.6% through last Thursday - the worst since 1974's 24.9% slide, according to Lipper.

On the other hand, they are up 15.2% in the fourth quarter, the best fourth quarter performance since 1999’s 20.3% surge, and quite a turnaround from the 17.8% loss suffered by diversified funds the prior quarter.

Still, more than three-quarters (77%) of the 2,202 US stock funds tracked by Lipper are set to post declines in 2001, according to Reuters.

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There were some bright spots this year: small-cap value funds continued to shine, with the average such fund gaining 16.7% so far, according to Lipper. Small-cap core funds were 8% higher, on average, while mid-cap value funds rose 10.7%.

Alternative Investments

The uncertain economic times boosted gold funds (up 18.3% on average) and real estate funds (8.5% higher on average).

Also benefiting from the stock market tumult were bond funds. The average taxable bond fund has risen 5.5% in 2001, according to Lipper.

Tech Tripped

Science and technology funds have lost 37.1% this year- and have now wiped out the gains from their 1999 run. But in 2001 telecom firms fared even worse, slumping 39.2% so far.

Multi-cap growth funds fell 25.7%, and large-cap growth funds have lost 22.4% this year, according to the report.

Emerging markets funds fared best among international offerings but are still 4.6% lower in 2001.

Last year, diversified stock funds slipped an average 1.67%, compared with a 28.3% surge in 1999, according to Lipper.

Tops and Bottoms

The fund tracker says the top performing fund for the year so far is the Pilgrim Russia fund, with a 77.6% return. Bringing up the rear was the 55% loss of the Ameritor Investment fund.

As for the nation’s two largest funds, Fidelity Magellan is down 11% in 2001, while Vanguard’s 500 Index offering is 11.3% lower, according to Lipper.

November Mutual Fund movements