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Finally, a month where all the equity-fund categories were in the black. Stocks shot up during the first week of March on surprisingly strong economic news. But results tailed off from there as investors realized that corporate profits would lag behind the economic recovery.
Nonetheless, equity-fund categories posted good results across the board at month's end. For example, technology and precious-metals funds, which usually move in opposite directions, returned average increases of 9% and 10%, respectively, during March. Top-performing funds were high-risk names like Frontier Equity (FEFPX
) and Jacob Internet (JAMFX
), both of which gained more than 20%. Many technology funds scored 15% or better in the month (see BW Online's Interactive Mutual Fund Scoreboard).
Overall, with a 5.2% return in March, U.S. diversified stock funds handily beat the S&P 500-stock index' 3.7% showing. International funds did a notch better with a 5.3% return in the month. The worst-performing category was hybrid funds (which combine stocks and bonds in one fund), up only 2% in March.
GLITTERING GOLD FUNDS. The month's strong showing helped round out the quarter's results. For 2002's first three-month period, the S&P 500 and U.S. diversified equity funds were basically flat. International equity fared a bit better, up 3.3%
Standouts in the quarter were precious-metals funds, up a stunning 37% on average. Some gold funds scored gains of 50% or better. First Eagle SoGen Gold (SGGDX
) is the only top-performing gold fund that earns an A-rating within its category from BusinessWeek. Investors in diversified emerging markets funds also couldn't complain, with a quarterly gain of 12% on average.
Of diversified U.S. equity funds, small-cap value fared the best in the quarter, with a 7.5% return (large-cap value and mid-cap value both gained around 2%). Real estate, Latin America, and Asia funds also turned in respectable returns of 7% or so on average for the first quarter.
BOTTOM-HUGGERS. The fund world's laggards so far this year are mainly communications, down 15% on average. They were followed by health and technology, which were down half as much in the quarter. Clustered at the bottom on the quarterly rankings are funds like Fidelity Select Wireless (FWRLX
), Van Wagoner Emerging Growth (VWEGX
), and Invesco Telecommunications (ISWCX
), all down about 26% this year through the end of March. Large-cap, mid-cap, and small-cap growth fund categories posted negative returns in the quarter of about 2%.
On the fixed-income side, returns were poor in March as investors worried that the economic recovery would lead to higher interest rates, which would hurt bond prices. Long- and intermediate-term bond funds fell about 2% on average, while short- and ultrashort-term bond funds were roughly flat in March. In a good month for equities, the best-performing bond funds were the riskiest -- convertible and high-yield categories gained 3.5% and 1.9%, respectively.
For the quarter, bond funds, on average, did about the same as stock funds: Returns were essentially flat. The quarter's only standout bond-fund category was emerging markets, up 6.8%. Phoenix-Goodwin Emerging Markets Bond (PEMBX
), up 9.6% for the quarter, and Scudder Emerging Markets Income (SCEMX
), up 9.3%, were the top first-quarter fixed-income performers.
By Amey Stone in New York
Upgraded to BusinessWeek's A list in March:
AIM Global Health Care A
AIM Mid Cap Equity A
AIM Small Cap Growth A
Bjerman Micro Cap Growth
Liberty Select Value A
MFS New Discovery A
MS Hlth Sciences B
MS Instl Mid Cap Value Instl
Munder Micro Cap Equity A
North Track PSE Tech 100 Idx A
One Group Mid Cap Growth I
Reserve Private Eqty Small Cap Growth R
VM West Coast Equity A
Wachovia Special Values A
Wasatch Ultra Growth
Wells Fargo Small Cap Opportunities I
Downgraded from BusinessWeek's A-list in March:
Fidelity New Millennium
Fidelity Select Health Care
Fidelity Select Transportation
Heritage Capital Apprec A
Leuthold Core Investment
Longleaf Partners Small Cap
Merrill Lynch Focus Value B
Mutual Beacon Z
Mutual Discovery Z
Purisima Total Return
US Global Leaders Growth
Value Line Special Situations
Vontobel US Value
Wells Fargo Strategic Income I
WM Growth Fund of the Northwest A By Amey Stone in New York