Funds: Reaping Returns from Afar

International portfolios performed strongly in December, buoyed by a weak U.S. dollar. Domestically, growth and biotech funds fared well

By Amey Stone

Mutual-fund investors ended 2004 on a high note, bolstered in December by a series of strong economic reports, a spike in merger-and-acquisition activity, and yearend "window dressing" by portfolio managers always eager to finish the year with a crop of winning stocks in their funds.

The average diversified equity fund rose 3.4% in December, the same as the S&P 500-stock index (see ). For all of 2004, funds surged 12.8%, handily outpacing the S&P's 9.2% increase. (For complete results for more than 5,000 funds, see BW Online's Interactive Mutual Fund Scoreboard.)


 . International funds fared even better than domestic ones in December, rising 4.2%, thanks mainly to continued weakness in the U.S. dollar. Currency translation resulted in extra gains for foreign stocks. Diversified emerging markets climbed 4.8% -- even better than funds that invest in developed markets.

Oil-producing developing economies were helped by high energy prices. Latin America was the top-performing fund category of the month, rising 8.7%. Europe funds gained 4.6%. Eastern Europe proved an especially strong market, as oil and commodity prices boosted the Russian economy. Japan funds also outperformed, rising 5.5%, as the country's economy continued its rebound.

Of U.S. diversified funds, those that employ a growth strategy (seeking out stocks with strong earnings) outperformed value-oriented funds (which look for shares that seem inexpensive). Small-cap growth funds gained 4%, and mid-cap growth climbed 4.1%. The top-performing fund overall for the month was tiny Perkins Opportunity (POFDX ), which climbed 18.4% in December. Small-cap value funds rose just 2.9%, and large-cap value funds gained 3.2% on average.


  The best sector for fund shareholders was health, as biotech gains fueled a 6.3% run-up in December. ProFunds Biotechnology Ultrasector Inv (BIPIX ), the top-performing among them, surged 10.9%.

Real estate, up 5.5%, was the second-best performing sector as mortgage rates stayed tame and the housing sector proved surprisingly strong. CGM Realty (CGMRX ) climbed 14.5%, the second-best performing fund overall. It was followed in the rankings by peer Alpine US Real Estate Equity (EUEYX ), which returned 14.3%.

Precious-metals funds were the worst sector, falling 5.7% in the month. They tend to perform best when investor sentiment is bearish. Rydex Precious Metals (RYPMX ), an index fund, fell 8.6% in December.


  Fixed-income remained a haven, even as the Federal Reserve raised short-term rates on Dec. 14. The average diversified bond fund gained 1%, slightly better than the 0.9% total return for the Lehman Brothers Aggregate Bond Index.

The best-performing fixed-income category was emerging markets bonds. Those portfolios rose 2.9% on average. Convertible-bond funds came next in the rankings, with a 2.6% advance.

Long-term government bond funds, ranked third among bond-fund categories, gained 2% on average. That category had the best-performing bond fund for the month in American Century Target Maturity 2030 (ACTAX ), a long government bond fund that gained 6.2% in December and returned 17% for all of 2004. Hallmark Convertible Securities (HCSIX ), was the second-best performing bond fund, with a 5.9% return in December -- and a 7.5% gain for 2004.

Even risk-averse ultrashort bond funds were able to notch up a 0.2% return, despite the Fed's mid-December rate hike. As 2004 wrapped up, mutual-fund investors weren't particularly worried about rising interest rates or a sinking dollar. They preferred instead to cheer a new round of dealmaking on Wall Street and an upbeat economic outlook for 2005.

Fund Symbol Five-Year Annualized Pretax Return
ABN AMRO Real Estate N ARFCX 21.3
AIM Energy Inv FSTEX 16.1
AIM Gold & Precious Metals Inv FGLDX 17.9
AIM Real Estate A IARAX 24.0
Aegis Value AVALX 20.6
Al Frank VALUX 16.2
AllianceBernstein Real Est Invstmnt Adv ARSYX 22.1
AllianceBernstein Real Est Invstmnt Instl I ARIIX 21.1
Alpine International Real Estate Equity Y EGLRX 17.8
Alpine Realty Income & Growth Y AIGYX 24.5
Alpine US Real Estate Equity Y EUEYX 32.0
Amer AAdvantage Small Cap Value PlanAhead AVPAX 22.5
Amer Century Glbl Gold Inv BGEIX 18.9
Amer Century Real Estate Inv REACX 21.9
Amer Century Sm Cap Vl Inv ASVIX 21.7
Amer Century Sm Company Inv ASQIX 16.5
Ariel ARGFX 16.8
Armada Small Cap Value I AMRIX 18.8
Artisan Small Cap Value ARTVX 17.7
Berwyn BERWX 17.7
Bjurman Barry Micro Cap Growth BMCFX 19.9
Boston Partners Long Short Equity Inv BPLEX 15.9
Boston Partners Small Cap Value II Inv BPSCX 26.1
Brazos Real Estate Securities Y BJRSX 20.3
Bridgeway Micro Cap Limited BRMCX 16.0
Bridgeway Ultra Small Company BRUSX 27.7
Bridgeway Ultra Small Company Market BRSIX 22.9
Bruce BRUFX 37.2
Buffalo Small Cap BUFSX 20.5
Burnham Financial Serv A BURKX 29.9
CGM Focus CGMFX 28.4
CGM Realty CGMRX 29.2
CNI Charter RCB Small Cap Value R RCBSX 16.6
CRM Small Cap Value Instl CRISX 16.7
Cohen & Steers Realty Focus Instl CSSPX 19.2
Cohen & Steers Realty Income C CSCIX 20.7
Cohen & Steers Realty Shares CSRSX 21.3
Columbia Real Estate Equity Z CREEX 20.0
Columbia Small Cap Z SMCEX 15.7
Consulting Grp Cap Mkts SmCp Vl Eq TSVUX 15.5
Davis Real Estate A RPFRX 20.9
Delafield DEFIX 18.7
Delaware American Services A DASAX 21.3
Delaware RE Inv Tr A DPREX 21.3
Diamond Hill Bank & Financial A BANCX 20.9
Dreyfus Premier Sm Cap Val A DSVAX 17.0
EII Realty Securities Instl EIIRX 19.9
Emerald Select Banking & Finance A HSSAX 21.6
Evergreen Health Care A EHABX 22.4
Evergreen Precious Metals A EKWAX 24.2
Excelsior Real Estate UMREX 20.9
F Russell Real Estate Securities S RRESX 21.7
FBR Large Cap Financial FBRFX 15.5
FBR Small Cap FBRVX 18.8
FBR Small Cap Financial FBRSX 26.1
FMC Strategic Value   18.9
Fairholme FAIRX 18.9
Fidelity Low Priced Stock FLPSX 19.5
Fidelity Real Estate Investment FRESX 22.3
Fidelity Select Construction & Housing FSHOX 17.2
Fidelity Select Home Finance FSVLX 17.5
Fidelity Select Medical Delivery FSHCX 22.2
Fidelity Select Medical Systems & Equipment FSMEX 17.3
Fidelity Select Natural Gas FSNGX 16.6
Fifth Third Micro Cap Value Instl MXAIX 20.5
First American Real Estate Securities Y FARCX 23.2
First Eagle Global A SGENX 16.8
First Eagle Gold A SGGDX 25.3
First Eagle Overseas A SGOVX 16.6
Forward Uniplan Real Estate Investment FFREX 19.8
Franklin Balance Sheet Invmt A FRBSX 16.7
Franklin MicroCap Value FRMCX 21.1
Franklin Real Estate Sec A FREEX 21.1
Fremont Real Estate FREFX 18.2
GMO Real Estate III GMORX 20.3
Gabelli Gold AAA GOLDX 21.5
Gabelli Westwood Realty AAA WESRX 20.1
Goldman Sachs Mid Cap Value A GCMAX 17.5
Goldman Sachs Real Estate Sec A GREAX 22.0
Goldman Sachs Small Cap Value A GSSMX 20.2
Harris Insight Small Cap Value N HSVAX 17.7
Heartland Select Value HRSVX 15.8
Heartland Value HRTVX 16.8
Heartland Value Plus HRVIX 16.3
Heitman REIT PBHG PBRTX 21.1
Hotchkis & Wiley Mid-Cap Value I HWMIX 24.1
Hotchkis & Wiley Small Cap Value I HWSIX 28.5
ICON Energy ICENX 24.4
ICON Financial ICFSX 16.0
ING Russia A LETRX 28.1
Ivy Global Natural Res A IGNAX 19.8
Ivy Real Estate Securities A IRSAX 22.2
J Hancock Classic Value A PZFVX 17.5
J Hancock Real Estate A JREAX 20.0
James Advantage Small Cap JASCX 15.9
Janus Mid Cap Value Inv JMCVX 17.1
Jennison Health Sciences B PHLBX 16.0
Jennison Natural Resources A PGNAX 19.3
Keeley Small Cap Value KSCVX 16.8
Kensington Strategic Realty A KSRAX 23.5
Legg Mason Eq Tr US Small Cap Vl Prim LMSVX 15.5
Lord Abbett Mid Cap Value A LAVLX 18.3
Lord Abbett Small Cap Value A LRSCX 17.8
Matthews Asian Growth & Income MACSX 16.8
Meridian Growth MERDX 15.4
Meridian Value MVALX 15.5
Merrill Lynch Natural Resources A MDGRX 17.2
Morgan Stanley Instl European Real Estate A MSUAX 22.6
Morgan Stanley Instl US Real Estate A MSUSX 21.8
Morgan Stanley Real Estate B REFBX 20.5
Munder Real Estate Eq Invmnt B MURBX 19.8
Munder Small Cap Value Y MCVYX 19.8
Mutual Financial Services A TFSIX 17.0
Neuberger Berman Genesis Inv NBGNX 17.7
OCM Gold OCMGX 20.7
Oakmark Global I OAKGX 18.6
One Group Small Cap Value I PSOPX 19.5
Oppenheimer Gold & Special Minerals A OPGSX 17.2
Oppenheimer Small Cap Value A QVSCX 17.0
PIMCO NFJ Small Cap Value A PCVAX 18.8
PIMCO PEA Renaissance A PQNAX 17.3
Pacific Advisors Small Cap A PASMX 18.1
Pacific Capital Small Cap Y PSCYX 22.9
Perritt Micro Cap Opportunities PRCGX 22.4
Phoenix Mid Cap Value Fund A FMIVX 17.9
Phoenix-Duff & Phelps Real Estate Sec A PHRAX 23.3
Phoenix-Seneca Equity Income A REALX 19.9
Pioneer Real Estate Shares A PWREX 21.0
Principal Real Estate Securities A PRRAX 22.4
Putnam Small Cap Value A PSLAX 17.9
RS Contrarian Value RSCOX 17.1
RS Global Natural Resources RSNRX 23.1
RS Partners RSPFX 27.7
Royce Low Priced Stock RYLPX 16.3
Royce Micro-Cap Inv RYOTX 17.1
Royce Opportunity Inv RYPNX 18.8
Royce Pennsylvania Mutual Inv PENNX 16.5
Royce Select RYSFX 16.4
Royce Special Equity RYSEX 20.6
Royce Total Return Inv RYTRX 15.6
STI Classic Small Cap Value Equity L STCEX 18.1
Scudder Gold & Precious Metals S SCGDX 25.7
Scudder Small Company Value S SCSUX 15.4
Security Capital US Real Estate S SUSIX 21.7
Security Mid Cap Value A SEVAX 18.2
Seligman Small-Cap Value A SSCVX 16.9
Skyline Special Equities SKSEX 16.6
Smith Barney Small Cap Value A SBVAX 18.5
Spirit of America Real Estate A SOAAX 21.6
State Street Research Aurora A SSRAX 17.0
State Street Research Global Resources A SSGRX 34.7
State Street Research Health Science A SHSAX 18.8
Strategic Partners Real Estate Securities B PURBX 21.8
Stratton Monthly Dividend REIT STMDX 20.5
Stratton Small Cap Value STSCX 18.7
Strong Advisor Small Cap Value Z SSMVX 20.1
Strong Mid Cap Disciplined SMCDX 15.7
T Rowe Price Mid-Cap Value TRMCX 16.9
T Rowe Price Real Estate TRREX 22.8
T Rowe Price Small Cap Value PRSVX 19.7
TAMARACK Enterprise S TETSX 19.5
TAMARACK Microcap Value S TMVSX 17.3
TCW Galileo Dividend Focused N TGIGX 15.6
TCW Galileo Opportunity N TGONX 16.2
TCW Galileo Value Opportunities I TGVOX 17.3
Texas Capital Value & Growth TCVGX 18.5
Third Avenue Real Estate Value TAREX 23.2
Third Millennium Russia TMRFX 21.3
Tocqueville Gold TGLDX 23.6
Turner Micro Cap Growth TMCGX 15.8
UMB Scout Small Cap UMBHX 15.6
US Global Accolade Eastern European EUROX 25.4
US Global Inv Global Resources PSPFX 24.0
US Global Inv Gold Shares USERX 17.2
US Global Inv World Prec Minerals UNWPX 18.9
USAA Precious Metals & Minerals USAGX 23.3
Undiscovered Managers Behavioral Vl Instl UBVLX 15.7
Undiscovered Managers REIT Instl URTLX 22.3
Van Eck Intl Investors Gold A INIVX 19.0
Van Kampen Real Estate Securities A ACREX 20.8
Vanguard Energy Inv VGENX 19.3
Vanguard Precious Metals VGPMX 20.3
Vanguard REIT Index VGSIX 21.2
Victory Real Estate A VREIX 19.0
Wasatch Core Growth WGROX 18.1
Wasatch Micro Cap WMICX 24.5
Wasatch Small Cap Value WMCVX 22.1
Wells Fargo Small Cap Opportunities I NVSOX 15.6
Wells S&P REIT Index A WSPAX 20.8
William Blair Small Cap Growth N WBSNX 23.5
Wilshire Target Small Co Vl Inv DTSVX 15.4
Yacktman YACKX 17.2
Yacktman Focused YAFFX 15.8
iShares MSCI Austria Index EWO 22.6
n/i numeric investors Small Cap Value NISVX 26.6

Stone is a senior writer for BusinessWeek Online in New York

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