A Cruel, Cold January for Funds

Bonds beat equities, higher interest rates hurt real estate funds, and fears of slowing growth in the sector saw tech take a nasty tumble

By Amey Stone

So much for the mythical January effect. The market typically rallies in the first month of the year as investors, finished with their tax-loss selling from the year before and armed with annual bonuses, start buying stocks. Not so in 2005.

Stocks cratered the first three weeks in January. Only a spate of buying in the last week, spurred by stronger-than-expected earnings, saved equity-fund portfolios from steeper monthly losses. As it was, the U.S. diversified equity funds fell an average of 2.7% in January, a bit worse than the negative 2.4% returns of the S&P Composite Index, according to data from Standard & Poor's.

Funds that invest internationally typically fared far better than U.S. funds in January, falling just 1.3% on average. (For complete results for more than 5,000 funds, see BW Online's Interactive Mutual Fund Scoreboard.)


  The best-performing stock funds of the month were those that bet stocks will fall. The No. 1 and No. 2 funds, Rydex Dynamic Venture 100 (RYVNX ) and ProFunds UltraShort OTC (USPIX ), gained 13.6% and 13.4%, respectively.

Aside from the handful of short-selling funds, the standouts were mostly natural-resources funds (up 1.7% on average) and emerging-market funds (up 0.7% on average). Returns for those two categories tend to correlate, since most of the world's natural resources are in developing nations and energy prices were rising for most of January. T. Rowe Price Emerging Europe & Mediterranean (TREMX ) was the third-best-performing stock fund overall. It gained 9.9% in January. Ranked sixth overall was Oppenheimer Real Asset (QRAAX ), a fund that invests in commodities.

The worst-performing sector in January was real estate, as investors worried about rising interest rates. Those funds fell 7.2% on average. Technology funds also were hard hit, dropping an average of 6.7%, as investors worried about slowing growth in that pricey sector. ProFunds Internet Ultrasector (INPIX ) slid 14.6% in the month, making it the worst tech-fund performer.


  In general, funds that emphasize value stocks outperformed those that look for earnings growth. For example, large-cap value funds were off 2%, while large-cap growth funds fell 3.2%. The worst-performing fund in the month was Apex Mid Cap Growth (BMCGX ), which plopped 17.3%.

Investors who sought safety in bonds were well-served in January. The average tax-free-bond fund gained 0.7%, and the average taxable bond fund ticked up 0.2%. Long-term government bond funds rose 2.2%, the best-performing fixed-income sector. American Century Target Maturity 2030 (ACTAX ) was the top bond fund, gaining 8.5% in January.

The New Year didn't start auspiciously for most investors. But by January's end, they had reason to hope that the down weeks of 2005's start were just a temporary New Year's hangover.

  The A-List Funds
Fund 5-Year Annualized Pre-Tax Return
ABN AMRO Mid Cap N 15.6
ABN AMRO Real Estate N 19.1
AIM Energy Inv 17.0
AIM Gold & Precious Metals Inv 18.3
AIM Real Estate A 21.9
Aegis Value 20.3
AllianceBernstein Real Est Invstmnt Adv 19.9
AllianceBernstein Real Est Invstmnt Instl I 18.7
Alpine International Real Estate Equity Y 19.7
Alpine Realty Income & Growth Y 23.1
Alpine US Real Estate Equity Y 33.8
Amer AAdvantage Small Cap Value PlanAhead 22.2
Amer Century Glbl Gold Inv 20.3
Amer Century Real Estate Inv 20.1
Amer Century Sm Cap Vl Inv 21.7
Amer Century Sm Company Inv 16.8
Ariel 18.6
Armada Small Cap Value I 19.3
Artisan Small Cap Value 17.9
Berwyn 18.0
Bjurman Barry Micro Cap Growth 17.1
BlackRock Global Resources Inv A 36.7
Boston Partners Long Short Equity Inv 17.2
Boston Partners Small Cap Value II Inv 25.8
Brazos Real Estate Securities Y 18.0
Bridgeway Micro Cap Limited 17.1
Bridgeway Ultra Small Company 27.1
Bridgeway Ultra Small Company Market 21.5
Bruce 34.8
Buffalo Small Cap 18.1
Burnham Financial Serv A 30.8
CGM Focus 32.0
CGM Realty 30.6
CRM Small Cap Value Instl 17.3
Cohen & Steers Realty Focus Instl 19.0
Cohen & Steers Realty Income C 18.6
Cohen & Steers Realty Shares 19.4
Columbia Real Estate Equity Z 18.0
Consulting Grp Cap Mkts SmCp Vl Eq 15.9
Davis Real Estate A 19.7
Delafield 19.5
Delaware American Services A 19.9
Delaware RE Inv Tr A 19.2
Diamond Hill Bank & Financial A 21.5
Dreyfus Premier Sm Cap Val A 17.7
EII Realty Securities Instl 17.7
Emerald Select Banking & Finance A 22.5
Evergreen Health Care A 17.6
Evergreen Precious Metals A 25.2
Evergreen Small Cap Value I 15.7
Excelsior Real Estate 18.8
F Russell Real Estate Securities S 19.6
FBR Large Cap Financial 15.6
FBR Small Cap 19.0
FBR Small Cap Financial 26.9
FMC Strategic Value 20.0
Fairholme 18.9
Fidelity Low Priced Stock 19.7
Fidelity Real Estate Investment 20.5
Fidelity Select Construction & Housing 19.9
Fidelity Select Gold 16.7
Fidelity Select Home Finance 18.0
Fidelity Select Insurance 16.2
Fidelity Select Medical Delivery 22.9
Fidelity Select Medical Systems & Equipment 15.7
Fidelity Select Natural Gas 16.8
Fifth Third Micro Cap Value Instl 19.6
First American Real Estate Securities Y 21.1
First Eagle Global A 17.3
First Eagle Gold A 26.0
First Eagle Overseas A 17.0
Forward Uniplan Real Estate Investment 17.6
Franklin Balance Sheet Invmt A 17.0
Franklin MicroCap Value 20.2
Franklin Real Estate Sec A 19.7
Franklin Small Cap Value A 17.6
Gabelli Gold AAA 22.9
Goldman Sachs Mid Cap Value A 18.2
Goldman Sachs Real Estate Sec A 20.1
Goldman Sachs Small Cap Value A 19.7
Harris Insight Small Cap Value N 18.6
Heartland Select Value 16.2
Heartland Value 16.8
Heartland Value Plus 15.8
Heitman REIT PBHG 19.2
Hotchkis & Wiley Mid-Cap Value I 24.8
Hotchkis & Wiley Small Cap Value I 29.7
ICON Energy 25.7
ICON Financial 16.4
ICON Leisure and Consumer 16.4
ING Precious Metals 17.5
ING Russia A 28.4
Ivy Global Natural Res A 20.9
Ivy Real Estate Securities A 20.4
J Hancock Classic Value A 18.1
J Hancock Real Estate A 17.7
James Advantage Small Cap 18.4
Janus Mid Cap Value Inv 17.3
Jennison Natural Resources A 20.0
Keeley Small Cap Value 17.3
Kensington Strategic Realty A 22.6
Legg Mason Eq Tr US Small Cap Vl Prim 15.8
Lord Abbett Mid Cap Value A 18.0
Lord Abbett Small Cap Value A 18.4
Managers Real Estate Securities 16.7
Marshall Mid Cap Value Inv 16.1
Matthews Asian Growth & Income 16.8
Meridian Growth 15.6
Merrill Lynch Natural Resources A 18.4
Morgan Stanley Instl European Real Estate A 23.7
Morgan Stanley Instl US Real Estate A 19.9
Morgan Stanley Real Estate B 18.4
Munder Real Estate Eq Invmnt B 17.9
Munder Small Cap Value Y 20.9
Mutual Financial Services A 18.2
Neuberger Berman Genesis Inv 18.1
OCM Gold 21.7
Oakmark Global I 20.1
Oakmark International Small Cap I 15.9
One Group Small Cap Value I 20.3
Oppenheimer Gold & Special Minerals A 17.8
PIMCO NFJ Small Cap Value A 19.6
PIMCO PEA Renaissance A 17.0
Pacific Advisors Small Cap A 18.3
Pacific Capital Small Cap Y 22.7
Perritt Micro Cap Opportunities 19.9
Phoenix Mid Cap Value Fund A 19.4
Phoenix-Duff & Phelps Real Estate Sec A 21.3
Phoenix-Seneca Equity Income A 17.6
Pioneer Real Estate Shares A 18.8
Principal Real Estate Securities A 20.0
Putnam Small Cap Value A 17.8
RS Global Natural Resources 25.1
RS Partners 29.0
RS Value 18.3
Royce Low Priced Stock 15.6
Royce Micro-Cap Inv 16.3
Royce Opportunity Inv 16.7
Royce Pennsylvania Mutual Inv 16.5
Royce Premier 15.8
Royce Select 16.3
Royce Special Equity 20.4
Royce Total Return Inv 16.2
STI Classic Small Cap Value Equity L 18.6
Scudder Gold & Precious Metals S 26.0
Scudder Small Company Value S 16.0
Security Capital US Real Estate S 19.4
Security Mid Cap Value A 18.1
Seligman Small-Cap Value A 17.3
Skyline Special Equities 16.7
Smith Barney Small Cap Value A 18.1
Spirit of America Real Estate A 19.3
Strategic Partners Real Estate Securities B 21.1
Stratton Monthly Dividend REIT 18.6
Stratton Small Cap Value 18.7
Strong Advisor Small Cap Value Z 17.8
Strong Mid Cap Disciplined 15.6
T Rowe Price Mid-Cap Value 17.1
T Rowe Price Real Estate 20.6
T Rowe Price Small Cap Value 19.2
TAMARACK Enterprise S 17.8
TAMARACK Microcap Value S 17.0
TCW Galileo Dividend Focused N 15.5
TCW Galileo Value Opportunities I 17.9
Texas Capital Value & Growth 20.1
Third Avenue Real Estate Value 22.7
Third Millennium Russia 23.1
Tocqueville Gold 24.4
UMB Scout Small Cap 16.2
US Global Accolade Eastern European 24.6
US Global Inv Global Resources 25.0
US Global Inv Gold Shares 19.1
US Global Inv World Prec Minerals 20.5
USAA Precious Metals & Minerals 24.6
Undiscovered Managers Behavioral Vl Instl 15.9
Undiscovered Managers REIT Instl 20.3
Van Eck Intl Investors Gold A 20.2
Van Kampen Real Estate Securities A 18.8
Vanguard Energy Inv 20.6
Vanguard Precious Metals 22.2
Vanguard REIT Index 18.9
Vanguard Selected Value 16.6
Victory Real Estate A 17.0
Wasatch Core Growth 18.4
Wasatch Micro Cap 22.8
Wasatch Small Cap Value 20.3
Wells S&P REIT Index A 18.6
Westwood Realty AAA 18.6
William Blair Small Cap Growth N 21.5
Wilshire Target Small Co Vl Inv 16.7
Yacktman 18.4
Yacktman Focused 16.5
iShares MSCI Austria Index 24.2
n/i numeric investors Small Cap Value 27.6

Stone is a senior writer for BusinessWeek Online in New York

Edited by Patricia O'Connell

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