A Middling Month for Mutual Funds
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%).
GOOD AS GOLD.
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
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