Indexers Lead Big Stock-Fund Gains Double-Digit Performance Enjoyed By Every Major Category Of Mutual Fund

Index funds set the pace as every major category of domestic stock mutual funds posted double-digit gains in the first half of 1995, a leading fund research firm reported Wednesday.

Lipper Analytical Services Inc. said its average of 1,873 general equity funds climbed 16.63 percent in the January-June period, assuming reinvestment of dividends.

The gains recorded by six main types of stock funds ranged from 19.86 percent for index funds set up to track performance of the Standard & Poor’s 500-stock composite index, to 14.56 percent for the usually conservative group of equity income funds.

Index funds have benefited from strong demand all year for the multinational blue chip stocks that dominate the S&P 500.

Their showing this year has also been a victory for those who believe it is best to invest “passively” in an index fund, saving the management, research and trading costs that are incurred by an actively managed fund.

To analysts and managers who make their living trying to outwit the market, any period in which index funds outperform managed funds is less than heartening.

As Frank Prezelski, director of research at the Wall Street firm of Ladenburg, Thalmann & Co. put it recently, “This is akin to the pace car winning at Indianapolis.”

Still, managed stock funds that invest domestically handily beat international and global stock funds in the first half. Lipper’s average of 693 world equity funds struggled to a 2.44 percent return, weighed down in particular by Japanese funds, which were down 13.74 percent, and Latin American funds, down 20.55 percent.

The Latin American group actually showed even larger losses earlier in the year, before staging a 14.55 percent rally in the second quarter.

All told, the second quarter, with an 8.71 percent gain for the average stock fund, was the best threemonth period for equity funds since the fourth quarter of 1992, reported A. Michael Lipper, president of Lipper Analytical.

“The average U.S. stock fund beat every international objective in the second quarter except Latin America,” Lipper said. “It shows once again, investors have to do more than simply go overseas.”