A Middling Month for Mutual Funds

After a mid-May rally fizzled, most funds (both value and growth) ended the period in the red

Investors were a fickle bunch in May, buying stocks one week, only to sell them the next. The market rallied on positive economic news mid-month but stalled at the end as global political risks and domestic terrorism threats intensified. May ended on a down note with the S&P 500-stock index losing 1%. The mutual funds in BusinessWeek's Mutual Fund Scoreboard fared a bit worse than the broader market, and the average diversified equity fund was down 2% on average.

One significant development in mutual-fund results this month: There was very little difference in returns between value- and growth-fund strategies. For example, small-cap value was down 3% in the month, and small-cap growth was down 4%. Most of the year, value and growth categories have diverged sharply. Year-to-date, small-cap value is up 11%, and small-cap growth is down 14%. In May, the same narrow range of returns was evident among large-cap funds (value was flat, growth down 2%) and mid-cap funds (value down 1%, growth down 3%).


  Most U.S. stock funds turned in middling results -- dipping slightly into the red or eking out a small gain. Very few U.S. diversified stock funds showed up in the top 100 funds this month. A few that did are large-cap US Global Investors All American Equity (GBTFX ), which was up 7%, small-cap Perkins Opportunity (POFDX), up 6%, and Oberweis Micro Cap (OBMCX ), up 4%.

The only stand-out category was precious metals -- up an average of 20% in May as the price of gold spiked. The two top-performing funds for the month were both from U.S. Global. World Precious Minerals (UNWPX ) was up 41%, and Gold Shares (USERX ) was up 33% in the month. Year-to-date, those funds are up 133% and 122%, respectively, while the precious-metals category is up 76%.

Technology and health-care sector funds brought up the rear in terms of domestic-fund returns in May. Tech funds were down a modest 6% but have lost a punishing 24% year-to-date. Black Oak Emerging Technology (BOGSX ) was down 16%, and Van Wagoner Post Venture (VWPVX ) was down 14% in May. The broad health-care fund category was down 4% in May. Riskier offerings, like Amerindo Health & Biotech (DNADX ), down 17%, fared worse.


  Funds that invest overseas were a bit more volatile than U.S. offerings. Japan funds gained 6% in May as that country's economy showed some strength. Latin American funds were the worst-performing category overall, down 6% in May. But Latin American funds are still up 1% year to date.

On the fixed-income side, most bond funds limped to a small gain of less than a percent or so for the month. The duration of the funds didn't seem to matter much. Long funds returned 0.8% and Ultrashort funds returned 0.2% on average. The only losing bond-fund categories, as could be expected in a down market, were those with the highest-risk: convertible, emerging-markets, and high-yield bond funds. International bond funds, up 1.6% on average, had some of the highest returns, with T. Rowe Price International Bond (RPIBX ) up 3.8%.

New A-List Equity Funds in May

Fidelity Select Brokerage & Investment

Gabelli Investor ABC

Janus Balanced

Leuthold Core Investment


MFS Value A

Mutual Beacon Z

Mutual Discovery Z

Van Kampen Comstock A

Vanguard Wellesley Income

Vontobel US Value

1st Source Monogram Income Equity

FBR Financial Services A

Janus Adviser Balanced

Janus Adviser Core Equity

Janus Aspen Core Equity Instl

Julius Baer International Equity

Security Capital US Real Estate

Security Mid Cap Value A

Equity Funds Downgraded from A-List in May

CornerCap Small Cap Value

CRM SmCap Value Inv

Dreyfus Gr & Val Fds Midcap Value

Enterprise Small Co Value A

Fremont US Micro Cap

Hartford Capital Appreciation A

Liberty Acorn USA Z

LKCM Small Cap Equity

MS Special Value B

One Group Mid Cap Growth I

Pioneer Small Cap Value B

Quaker Small Cap Value

Reserve Private Eqty Small Cap Growth R

Schroder Capital US Small Companies Inv

T Rowe Price Small Cap Stock

Turner Mid Cap Growth

Wasatch Ultra Growth

Wells Fargo Small Cap Opportunities I

WM West Coast Equity A

By Amey Stone in New York

Edited by Patricia O'Connell

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