Funds: Reaping Returns from Afar


By Amey Stone Mutual-fund investors ended 2004 on a high note, bolstered in December by a series of strong economic reports, a spike in merger-and-acquisition activity, and yearend "window dressing" by portfolio managers always eager to finish the year with a crop of winning stocks in their funds.

The average diversified equity fund rose 3.4% in December, the same as the S&P 500-stock index (see table below). For all of 2004, funds surged 12.8%, handily outpacing the S&P's 9.2% increase. (For complete results for more than 5,000 funds, see BW Online's Interactive Mutual Fund Scoreboard.)

WEAK DOLLAR PAYS OFF.. International funds fared even better than domestic ones in December, rising 4.2%, thanks mainly to continued weakness in the U.S. dollar. Currency translation resulted in extra gains for foreign stocks. Diversified emerging markets climbed 4.8% -- even better than funds that invest in developed markets.

Oil-producing developing economies were helped by high energy prices. Latin America was the top-performing fund category of the month, rising 8.7%. Europe funds gained 4.6%. Eastern Europe proved an especially strong market, as oil and commodity prices boosted the Russian economy. Japan funds also outperformed, rising 5.5%, as the country's economy continued its rebound.

Of U.S. diversified funds, those that employ a growth strategy (seeking out stocks with strong earnings) outperformed value-oriented funds (which look for shares that seem inexpensive). Small-cap growth funds gained 4%, and mid-cap growth climbed 4.1%. The top-performing fund overall for the month was tiny Perkins Opportunity (POFDX), which climbed 18.4% in December. Small-cap value funds rose just 2.9%, and large-cap value funds gained 3.2% on average.

BIOTECH ADVANCES. The best sector for fund shareholders was health, as biotech gains fueled a 6.3% run-up in December. ProFunds Biotechnology Ultrasector Inv (BIPIX), the top-performing among them, surged 10.9%.

Real estate, up 5.5%, was the second-best performing sector as mortgage rates stayed tame and the housing sector proved surprisingly strong. CGM Realty (CGMRX) climbed 14.5%, the second-best performing fund overall. It was followed in the rankings by peer Alpine US Real Estate Equity (EUEYX), which returned 14.3%.

Precious-metals funds were the worst sector, falling 5.7% in the month. They tend to perform best when investor sentiment is bearish. Rydex Precious Metals (RYPMX), an index fund, fell 8.6% in December.

SAFETY OF BONDS. Fixed-income remained a haven, even as the Federal Reserve raised short-term rates on Dec. 14. The average diversified bond fund gained 1%, slightly better than the 0.9% total return for the Lehman Brothers Aggregate Bond Index.

The best-performing fixed-income category was emerging markets bonds. Those portfolios rose 2.9% on average. Convertible-bond funds came next in the rankings, with a 2.6% advance.

Long-term government bond funds, ranked third among bond-fund categories, gained 2% on average. That category had the best-performing bond fund for the month in American Century Target Maturity 2030 (ACTAX), a long government bond fund that gained 6.2% in December and returned 17% for all of 2004. Hallmark Convertible Securities (HCSIX), was the second-best performing bond fund, with a 5.9% return in December -- and a 7.5% gain for 2004.

Even risk-averse ultrashort bond funds were able to notch up a 0.2% return, despite the Fed's mid-December rate hike. As 2004 wrapped up, mutual-fund investors weren't particularly worried about rising interest rates or a sinking dollar. They preferred instead to cheer a new round of dealmaking on Wall Street and an upbeat economic outlook for 2005.

Fund

Symbol

Five-Year Annualized Pretax Return

ABN AMRO Real Estate N

ARFCX

21.3

AIM Energy Inv

FSTEX

16.1

AIM Gold & Precious Metals Inv

FGLDX

17.9

AIM Real Estate A

IARAX

24.0

Aegis Value

AVALX

20.6

Al Frank

VALUX

16.2

AllianceBernstein Real Est Invstmnt Adv

ARSYX

22.1

AllianceBernstein Real Est Invstmnt Instl I

ARIIX

21.1

Alpine International Real Estate Equity Y

EGLRX

17.8

Alpine Realty Income & Growth Y

AIGYX

24.5

Alpine US Real Estate Equity Y

EUEYX

32.0

Amer AAdvantage Small Cap Value PlanAhead

AVPAX

22.5

Amer Century Glbl Gold Inv

BGEIX

18.9

Amer Century Real Estate Inv

REACX

21.9

Amer Century Sm Cap Vl Inv

ASVIX

21.7

Amer Century Sm Company Inv

ASQIX

16.5

Ariel

ARGFX

16.8

Armada Small Cap Value I

AMRIX

18.8

Artisan Small Cap Value

ARTVX

17.7

Berwyn

BERWX

17.7

Bjurman Barry Micro Cap Growth

BMCFX

19.9

Boston Partners Long Short Equity Inv

BPLEX

15.9

Boston Partners Small Cap Value II Inv

BPSCX

26.1

Brazos Real Estate Securities Y

BJRSX

20.3

Bridgeway Micro Cap Limited

BRMCX

16.0

Bridgeway Ultra Small Company

BRUSX

27.7

Bridgeway Ultra Small Company Market

BRSIX

22.9

Bruce

BRUFX

37.2

Buffalo Small Cap

BUFSX

20.5

Burnham Financial Serv A

BURKX

29.9

CGM Focus

CGMFX

28.4

CGM Realty

CGMRX

29.2

CNI Charter RCB Small Cap Value R

RCBSX

16.6

CRM Small Cap Value Instl

CRISX

16.7

Cohen & Steers Realty Focus Instl

CSSPX

19.2

Cohen & Steers Realty Income C

CSCIX

20.7

Cohen & Steers Realty Shares

CSRSX

21.3

Columbia Real Estate Equity Z

CREEX

20.0

Columbia Small Cap Z

SMCEX

15.7

Consulting Grp Cap Mkts SmCp Vl Eq

TSVUX

15.5

Davis Real Estate A

RPFRX

20.9

Delafield

DEFIX

18.7

Delaware American Services A

DASAX

21.3

Delaware RE Inv Tr A

DPREX

21.3

Diamond Hill Bank & Financial A

BANCX

20.9

Dreyfus Premier Sm Cap Val A

DSVAX

17.0

EII Realty Securities Instl

EIIRX

19.9

Emerald Select Banking & Finance A

HSSAX

21.6

Evergreen Health Care A

EHABX

22.4

Evergreen Precious Metals A

EKWAX

24.2

Excelsior Real Estate

UMREX

20.9

F Russell Real Estate Securities S

RRESX

21.7

FBR Large Cap Financial

FBRFX

15.5

FBR Small Cap

FBRVX

18.8

FBR Small Cap Financial

FBRSX

26.1

FMC Strategic Value

18.9

Fairholme

FAIRX

18.9

Fidelity Low Priced Stock

FLPSX

19.5

Fidelity Real Estate Investment

FRESX

22.3

Fidelity Select Construction & Housing

FSHOX

17.2

Fidelity Select Home Finance

FSVLX

17.5

Fidelity Select Medical Delivery

FSHCX

22.2

Fidelity Select Medical Systems & Equipment

FSMEX

17.3

Fidelity Select Natural Gas

FSNGX

16.6

Fifth Third Micro Cap Value Instl

MXAIX

20.5

First American Real Estate Securities Y

FARCX

23.2

First Eagle Global A

SGENX

16.8

First Eagle Gold A

SGGDX

25.3

First Eagle Overseas A

SGOVX

16.6

Forward Uniplan Real Estate Investment

FFREX

19.8

Franklin Balance Sheet Invmt A

FRBSX

16.7

Franklin MicroCap Value

FRMCX

21.1

Franklin Real Estate Sec A

FREEX

21.1

Fremont Real Estate

FREFX

18.2

GMO Real Estate III

GMORX

20.3

Gabelli Gold AAA

GOLDX

21.5

Gabelli Westwood Realty AAA

WESRX

20.1

Goldman Sachs Mid Cap Value A

GCMAX

17.5

Goldman Sachs Real Estate Sec A

GREAX

22.0

Goldman Sachs Small Cap Value A

GSSMX

20.2

Harris Insight Small Cap Value N

HSVAX

17.7

Heartland Select Value

HRSVX

15.8

Heartland Value

HRTVX

16.8

Heartland Value Plus

HRVIX

16.3

Heitman REIT PBHG

PBRTX

21.1

Hotchkis & Wiley Mid-Cap Value I

HWMIX

24.1

Hotchkis & Wiley Small Cap Value I

HWSIX

28.5

ICON Energy

ICENX

24.4

ICON Financial

ICFSX

16.0

ING Russia A

LETRX

28.1

Ivy Global Natural Res A

IGNAX

19.8

Ivy Real Estate Securities A

IRSAX

22.2

J Hancock Classic Value A

PZFVX

17.5

J Hancock Real Estate A

JREAX

20.0

James Advantage Small Cap

JASCX

15.9

Janus Mid Cap Value Inv

JMCVX

17.1

Jennison Health Sciences B

PHLBX

16.0

Jennison Natural Resources A

PGNAX

19.3

Keeley Small Cap Value

KSCVX

16.8

Kensington Strategic Realty A

KSRAX

23.5

Legg Mason Eq Tr US Small Cap Vl Prim

LMSVX

15.5

Lord Abbett Mid Cap Value A

LAVLX

18.3

Lord Abbett Small Cap Value A

LRSCX

17.8

Matthews Asian Growth & Income

MACSX

16.8

Meridian Growth

MERDX

15.4

Meridian Value

MVALX

15.5

Merrill Lynch Natural Resources A

MDGRX

17.2

Morgan Stanley Instl European Real Estate A

MSUAX

22.6

Morgan Stanley Instl US Real Estate A

MSUSX

21.8

Morgan Stanley Real Estate B

REFBX

20.5

Munder Real Estate Eq Invmnt B

MURBX

19.8

Munder Small Cap Value Y

MCVYX

19.8

Mutual Financial Services A

TFSIX

17.0

Neuberger Berman Genesis Inv

NBGNX

17.7

OCM Gold

OCMGX

20.7

Oakmark Global I

OAKGX

18.6

One Group Small Cap Value I

PSOPX

19.5

Oppenheimer Gold & Special Minerals A

OPGSX

17.2

Oppenheimer Small Cap Value A

QVSCX

17.0

PIMCO NFJ Small Cap Value A

PCVAX

18.8

PIMCO PEA Renaissance A

PQNAX

17.3

Pacific Advisors Small Cap A

PASMX

18.1

Pacific Capital Small Cap Y

PSCYX

22.9

Perritt Micro Cap Opportunities

PRCGX

22.4

Phoenix Mid Cap Value Fund A

FMIVX

17.9

Phoenix-Duff & Phelps Real Estate Sec A

PHRAX

23.3

Phoenix-Seneca Equity Income A

REALX

19.9

Pioneer Real Estate Shares A

PWREX

21.0

Principal Real Estate Securities A

PRRAX

22.4

Putnam Small Cap Value A

PSLAX

17.9

RS Contrarian Value

RSCOX

17.1

RS Global Natural Resources

RSNRX

23.1

RS Partners

RSPFX

27.7

Royce Low Priced Stock

RYLPX

16.3

Royce Micro-Cap Inv

RYOTX

17.1

Royce Opportunity Inv

RYPNX

18.8

Royce Pennsylvania Mutual Inv

PENNX

16.5

Royce Select

RYSFX

16.4

Royce Special Equity

RYSEX

20.6

Royce Total Return Inv

RYTRX

15.6

STI Classic Small Cap Value Equity L

STCEX

18.1

Scudder Gold & Precious Metals S

SCGDX

25.7

Scudder Small Company Value S

SCSUX

15.4

Security Capital US Real Estate S

SUSIX

21.7

Security Mid Cap Value A

SEVAX

18.2

Seligman Small-Cap Value A

SSCVX

16.9

Skyline Special Equities

SKSEX

16.6

Smith Barney Small Cap Value A

SBVAX

18.5

Spirit of America Real Estate A

SOAAX

21.6

State Street Research Aurora A

SSRAX

17.0

State Street Research Global Resources A

SSGRX

34.7

State Street Research Health Science A

SHSAX

18.8

Strategic Partners Real Estate Securities B

PURBX

21.8

Stratton Monthly Dividend REIT

STMDX

20.5

Stratton Small Cap Value

STSCX

18.7

Strong Advisor Small Cap Value Z

SSMVX

20.1

Strong Mid Cap Disciplined

SMCDX

15.7

T Rowe Price Mid-Cap Value

TRMCX

16.9

T Rowe Price Real Estate

TRREX

22.8

T Rowe Price Small Cap Value

PRSVX

19.7

TAMARACK Enterprise S

TETSX

19.5

TAMARACK Microcap Value S

TMVSX

17.3

TCW Galileo Dividend Focused N

TGIGX

15.6

TCW Galileo Opportunity N

TGONX

16.2

TCW Galileo Value Opportunities I

TGVOX

17.3

Texas Capital Value & Growth

TCVGX

18.5

Third Avenue Real Estate Value

TAREX

23.2

Third Millennium Russia

TMRFX

21.3

Tocqueville Gold

TGLDX

23.6

Turner Micro Cap Growth

TMCGX

15.8

UMB Scout Small Cap

UMBHX

15.6

US Global Accolade Eastern European

EUROX

25.4

US Global Inv Global Resources

PSPFX

24.0

US Global Inv Gold Shares

USERX

17.2

US Global Inv World Prec Minerals

UNWPX

18.9

USAA Precious Metals & Minerals

USAGX

23.3

Undiscovered Managers Behavioral Vl Instl

UBVLX

15.7

Undiscovered Managers REIT Instl

URTLX

22.3

Van Eck Intl Investors Gold A

INIVX

19.0

Van Kampen Real Estate Securities A

ACREX

20.8

Vanguard Energy Inv

VGENX

19.3

Vanguard Precious Metals

VGPMX

20.3

Vanguard REIT Index

VGSIX

21.2

Victory Real Estate A

VREIX

19.0

Wasatch Core Growth

WGROX

18.1

Wasatch Micro Cap

WMICX

24.5

Wasatch Small Cap Value

WMCVX

22.1

Wells Fargo Small Cap Opportunities I

NVSOX

15.6

Wells S&P REIT Index A

WSPAX

20.8

William Blair Small Cap Growth N

WBSNX

23.5

Wilshire Target Small Co Vl Inv

DTSVX

15.4

Yacktman

YACKX

17.2

Yacktman Focused

YAFFX

15.8

iShares MSCI Austria Index

EWO

22.6

n/i numeric investors Small Cap Value

NISVX

26.6

Stone is a senior writer for BusinessWeek Online in New York


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