High-Flying Funds Mutuals Rack Up Strong Gains In Third Quarter
Stock mutual funds piled up broad gains in the third quarter of 1995, closing in on what could be their best year so far in the 1990s.
But wild-eyed optimists take warning: The last time the funds did so well through the first nine months of a year was in 1987, just before a stock market crash.
The research firm of Lipper Analytical Services Inc. reported Tuesday that the average return among more than 1,900 domestic stock funds reached 8.91 percent in the July-September quarter, bringing the gain for the first nine months of the year to 27.20 percent.
Michael Lipper, the firm’s president, said that was the strongest showing for the first nine months of a year since 1987, and the third best since Lipper Analytical began keeping records in 1959.
In the last quarter of 1987, a steep drop in the stock market left many funds with only small gains or about even for the year as a whole.
The only full year in this decade when stock funds fared better than they have so far in 1995 was 1991, when the Lipper equity fund average was up 36.52 percent.
The 1995 bull market in both stocks and bonds has been greeted with much skepticism on Wall Street, and the latest gains by the stock funds did little to dispel that mood.
“This year’s remarkable performance raises considerable concern a correction is close at hand,” the Lipper firm said in a news release reporting the third-quarter results.
“The correction (setback) will come when stock buyers run out of money,” Michael Lipper added, “but nobody’s come up with a system that can accurately predict when that will happen.”
Stock funds set up to invest across international borders, which have been lagging behind domestic funds all year, continued to trail. Lipper’s average of more than 725 world equity funds gained 4.57 percent in the third quarter, bringing its return for the first nine months to just 7.27 percent.
Among specialized equity funds, health and biotechnology funds were the third-quarter standouts, up 15.37 percent. Science and technology funds rose 14.95 percent in the quarter, holding onto the lead for the year to date with a 46.68 percent gain.
Actively managed diversified stock funds of many types outpaced index funds modeled after Standard & Poor’s 500-stock composite index in the third quarter, reversing a pattern of index fund dominance through the first half.
The only minus sign on the Lipper third-quarter charts was recorded by Pacific region funds excluding Japan, which lost 0.30 percent.