NEW YORK – Investors regained their appetite for more aggressive stocks in the second quarter, and preliminary figures released Friday show that most categories of mutual funds rode that enthusiasm to positive returns.
The most common type of mutual fund, U.S. diversified stock funds, posted a collective 2.47 percent return from the start of the quarter, with $3.05 trillion invested, according to results compiled by fund tracker Lipper Inc. The stock market’s May and June recovery helped funds with their returns, though the fund statistics did not include Friday’s trading, and there’s still a week to go in the second quarter.
Unlike the first quarter, more aggressive growth-oriented funds outpaced conservative value funds. The best performers were large-cap growth funds, with a 3.39 percent return, followed by multicap growth funds with a 3.5 percent return. Large-cap value funds only posted a 1.73 percent return.
“Growth does better in an up period, like we had for much of the second quarter,” said Donald Cassidy, senior analyst at Lipper. “There’s a debate on whether this means anything, whether there truly is a sea change going on here between growth and value, but I think, personally, we probably are seeing some kind of a change in leadership here, a gradual one.”
In sector equity funds, which have $199.1 billion in assets, real estate-focused funds were the best performers, with average returns of 12.64 percent thanks to strong performances from real estate investment trusts. Health and biotechnology funds, building on the steady gains and relative safety of the sector, posted a 6.31 percent return.
Natural resources funds, which include oil stocks, did well, with a 4.06 percent return, but their returns were off from previous quarters. They’ve still posted a one-year average return of 38.1 percent, however.
For mutual funds investing overseas, with combined assets of $734.9 billion, Latin American funds had returns of 7.89 percent, while Pacific funds that excluded Japanese stocks saw returns of 4.64 percent. That exclusion paid off, since Japan-only mutual funds had negative returns of 1.39 percent as the Japanese markets slumped in the quarter over economic concerns.
“We’ve liked Latin America right along for this year, and they have done nicely,” Cassidy said. “It’s certainly helped because Brazil and Mexico, the two biggest economies there, are oil producers and exporters, and who knows how high oil is going to go?”
Oil prices topped $60 per barrel in intraday trading Thursday, a record. While oil stocks and some foreign markets may rally, the move higher pushed U.S. stocks much lower. And with a week of major news events, including the Federal Reserve’s latest take on interest rates, still to come before the end of the quarter, the preliminary figures could change substantially by the end of the quarter Thursday.
Among individual funds, three of the top five performers for the second quarter were real estate funds. ProFunds Real Estate UltraSector Fund had the top return for the quarter, at 19.86 percent, followed by PIMCO’s Real Estate Return Strategy Fund at 17.01 percent. ProFunds’ Biotech fund was third with a 17 percent return, with ProFunds’ Internet fund’s 16.51 percent return and Adelante’s U.S. Real Estate Securities Fund’s 15.28 percent return rounding out the top five.
The worst five performers for the quarter came from a variety of funds. The worst performer, with a 25 percent negative return, was Ameritor’s Investment fund, a small-cap growth fund, followed by ProFunds’ Basic Materials fund with an 11.98 percent negative return. Corbin’s Small-Cap Value fund posted negative returns of 10.92 percent, the American Heritage Fund had a 10 percent negative return, and ProFunds’ Rising Rates Opportunity fund, a bear fund designed to hedge against falling markets, had a negative return of 9.64 percent.