“Value is doing well, just like it did during the last quarter,” Edward Rosenbaum, Lipper’s director of research, told the Wall Street Journal.
The strong economy has finally lifted some so-called value “plays”, while concerns about disappointing earnings and unreasonably high stock prices are weighing on growth investments.
Among funds that invest in large companies, value funds returned an average of 3.34% during the third quarter, compared with a slight loss among large-cap growth funds.
- Midcap value funds returned an average of 6.74% versus 3.18% for similar growth funds
- Small-cap value funds earned 6.54% for quarter, while small-cap growth funds returned just 0.35%.
At the same time the S&P 500 lost 1.04% in the third quarter, trailing more than 77% of all domestic-equity funds during the period, according to Morningstar.
Leading the Pack
Nearly every mutual fund category gained ground in the third quarter, led by financial services funds that were lifted 21.1% by a merger wave and optimism about stability in interest rates.
Health/biotechnology funds rose 12.5%, as investors countered their normal election year avoidance of the sector with a warm embrace of biotechnology.
Recent market volatility has drawn investors to the shelter of more stable investments, benefiting utility, real estate and natural resources funds, which rounded out the top five performing sectors, according to the Associated Press.
Bringing up the rear were telecommunications funds and science/technology investments – the only US sectors to lose ground. Telecommunications funds, which rose 72% last year, fell an average of 7.3%, while science/technology funds slipped 1.2% after a 132% rise in 1999.
Global funds took a beating during the third quarter, falling an average of 7.5%. Japanese, Pacific region and emerging market funds were hardest hit, with China and Europe funds close behind.
Funds focused on Canadian companies were the only global category to gain ground during the quarter, rising 4%.