December Cheer for Funds


By Amey Stone December could hardly have gone better for mutual-fund investors. Stock market gains were broad, lifting nearly every fund category, and interest rates were stable, buoying bond funds. The scandals that shook the industry in the fourth quarter abated a bit, taking a back seat to cheerier yearend news. The result was a month of solid returns that locked in 2003 bragging rights for many funds. The average U.S. diversified fund gained 3.2% in December and was up 33.4% for all of 2003, according to data from Standard & Poors Fund Services (see "BW Online's Interactive Mutual Fund Scoreboard" for complete results of more than 5,000 funds).

The market's complexion was slightly less risky in December than it had been most of the year. Funds that invest in large companies did better than those that seek out small companies, reversing the trend that prevailed for most of 2003. Large-cap growth funds gained 3%, while small-cap growth funds rose just 0.4% in December. In contrast, for the year, small-cap growth shot 45.1% higher, while large-cap growth climbed 28.1%.

FALLEN STARS. The change in favor to large-cap names is a major reason that the S&P 500-stock index, with a return of 5.2%, outpaced the average U.S. diversified fund for the month. For the year, however, funds (which often invest in small companies) beat the S&P by a wide margin, returning 33.4%, vs. 28.7% for the index.

Value-oriented investing strategies did better than growth in December as investors began to worry about high stock prices. For example, mid-cap value rose 4.6%, while mid-cap growth inched up 0.7%.

Technology funds were particularly hard hit by worries about valuations. That category eked out a gain of just 0.1% in December. But tech funds still ended the year with a stellar 58.5% return. Another high-flying sector, precious metals, also fell in December. It was the only fund group with negative returns in December, falling 0.8%. But the category is up 55% for 2003. Natural resources was the best-performing fund sector in December, soaring 11.9% as energy prices rose. ProFunds Energy Ultrasector (ENPIX), gained 20.6% in the month.

LATIN MUSCLE. International stock funds were also stand-out performers, with a 6.8% December gain, thanks in good part to the falling U.S. dollar. The month's top-performing fund was TCW Galileo European Equity (TGEEX), with a remarkable 33.3% return. Europe funds performed well, jumping 8%. Funds that invest in Pacific/Asia and Japan funds climbed around 7% on average.

Latin America was the month's strongest international category, with a 10.3% leap. That return was enough to make Latin America funds the top-performing category all year, with a 63.9% return.

Bond funds returned an average of 1% in December. There, just like the equity world, the stars were funds that invest internationally. The average emerging-markets bond fund returned 3.5% in the month, while the average international fund gained 3.1%. On the domestic side, riskier bond funds fared best, with convertibles scoring a 2.8% monthly gain and high-yield funds notching 2.2%.

Portfolio managers and mutual-fund investors could breathe a sigh of relief by the end of December. The year closed without revelations of more major scandals and with further gains in both stocks and bonds that rounded out a year of market-beating performance.

Funds Rated A in December

ABN AMRO Veredus Aggressive Growth N

AIM Opportunities I A

AIM Real Estate A

AXP Precious Metals A

Aegis Value

Al Frank

Alpine Realty Income & Growth Y

Alpine US Real Estate Equity Y

Amer AAdvantage Small Cap Value Instl

Amer Century Glbl Gold Inv

Amer Century Real Estate Inv

Amer Century Sm Cap Vl Inv

Armada Small Cap Value I

Artisan Mid Cap

Artisan Small Cap Value

Babson Enterprise

Bjurman Barry Micro Cap Growth

BlackRock International Opportunities Inv A

BlackRock US Opportunities Inv B

Boston Partners Small Cap Value II Invest

Brazos Micro Cap Y

Bridgeway Aggressive Investors 1

Bridgeway Micro Cap Limited

Bridgeway Ultra Small Company

Bridgeway Ultra Small Company Market

Bruce

Buffalo Small Cap

CGM Focus

CGM Realty

CNI Charter RCB Small Cap Value R

CRM Small Cap Value Instl

Calamos Growth A

Cohen & Steers Equity Income C

Cohen & Steers Realty Shares

Cohen & Steers Special Equity

Columbia Acorn Z

Columbia Small Cap Z

Delafield

Delaware Emerging Markets A

Diamond Hill Bank & Financial A

Dreyfus Gr & Val Fds Midcap Value

Dreyfus Premier Emerging Markets A

Dreyfus Premier Greater China A

Driehaus Emerging Markets Growth

Driehaus International Discovery

Eaton Vance Emerging Mkts A

Emerald Select Banking & Finance A

Evergreen Precious Metals Holdings A

F Russell Real Estate Securities S

FBR Small Cap Financial A

FBR Small Cap Value A

FMC Strategic Value

FMI Focus

Fidelity Canada

Fidelity Japan Small Co

Fidelity Low Priced Stock

Fidelity Real Estate Investment

Fidelity Small Cap Stock

Fifth Third Micro Cap Value Instl

First American Real Estate Securities Y

First American Small Cap Growth Opport Y

First Eagle Global A

First Eagle Gold

First Eagle Overseas A

Franklin Gold & Precious Metals A

Franklin Microcap Value

Fremont US Micro Cap

Fremont US Micro Cap Instl

GMO Emerging Countries III

Gabelli Gold

Goldman Sachs Small Cap Value A

Harding Loevner Emerging Markets

Hartford Mid Cap A

Heartland Value

Hennessy Cornerstone Growth

Hotchkis & Wiley Mid-Cap Value I

Hotchkis & Wiley Small Cap Value I

ICM/Isabelle Small Cap Value Inv

ICON Energy

IMS Capital Value

ING Precious Metals

ING Russia A

INVESCO Energy Inv

INVESCO Gold & Precious Metals Inv

Ivy Global Natural Res A

JPMorgan Mid Cap Value I

Janus Mid Cap Value Inv

Janus Small Cap Value Inv

Jennison Natural Resources A

Legg Mason Glbl Tr Emerging Mkts Prim

Longleaf Partners International

MFS International New Discovery A

MTB Small Cap Growth A

Matthews Asian Growth & Income

Matthews China

Matthews Korea

Matthews Pacific Tiger

Meridian Growth

Meridian Value

Merrill Lynch Global Small Cap C

Merrill Lynch Master Small Cap Value B

Merrill Lynch Natural Resources A

Munder Micro Cap Equity A

Mutual European Z

NI Numeric Investors Small Cap Value

Needham Growth

Neuberger Berman Genesis Inv

Nuveen NWQ Multi Cap Value R

OCM Gold

Oakmark International Small Cap I

Oakmark Select I

Oberweis Micro Cap

Olstein Financial Alert C

Oppenheimer Developing Markets A

Oppenheimer Gold & Special Minerals A

Oppenheimer Real Asset A

PIMCO PEA Renaissance A

PIMCO RCM Biotechnology D

Pacific Capital Small Cap Y

Perkins Discovery

Perritt Micro Cap Opportunities

Phoenix-Duff & Phelps Real Estate Sec A

Pioneer Small Cap Value A

Quaker Aggressive Growth A

Quant Emerging Markets Ord

RS Contrarian Value

RS Global Natural Resources

RS Partners

Royce Low Priced Stock

Royce Micro-Cap Inv

Royce Opportunity Inv

Royce Select

Royce Special Equity

Royce TrustShares Inv

Rydex Precious Metals

SSgA Aggressive Equity

Scudder Gold & Precious Metals S

Scudder Micro Cap Invest

Security Capital US Real Estate

Security Mid Cap Value A

Select Energy Service

Select Gold

Select Medical Systems & Equipment

Select Natural Gas

State Street Research Aurora A

State Street Research Global Resources A

Strategic Partners Real Estate Securities B

Stratton Monthly Dividend REIT

Strong Advisor Small Cap Value Z

Strong Mid Cap Disciplined

T Rowe Price Intl Discovery

T Rowe Price Real Estate

T Rowe Price Small Cap Value

TCW Galileo Emerging Markets Equity I

TCW Galileo Opportunity N

TCW Galileo Value Opportunities I

Third Avenue Real Estate Value

Third Millennium Russia

Tocqueville Gold

Tocqueville Small Cap Value

Touchstone Emerging Growth A

Turner Micro Cap Growth

Turner Small Cap Value

US Global Accolade Eastern European

US Global Inv Global Resources

US Global Inv Gold Shares

US Global Inv World Prec Minerals

USAA Precious Metals & Minerals

Undiscovered Managers Behavioral Vl Instl

Undiscovered Managers REIT Instl

Value Line Emerging Opportunities

Van Eck Intl Investors Gold A

Van Kampen Global Franchise A

Vanguard Capital Opportunity

Vanguard Energy

Vanguard International Explorer

Vanguard Precious Metals

Wasatch Core Growth

Wasatch Micro Cap

Wasatch Small Cap Growth

Wasatch Small Cap Value

Wasatch Ultra Growth

Westport Select Cap I

iShares MSCI Malaysia Index Amey Stone is a senior writer at BusinessWeek Online and covers the markets as a Street Wise columnist and mutual funds in her Mutual Funds Maven column


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