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Domestic Equity Funds -- First Quarter 2005 Review

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Domestic equity funds lost ground in March, reverting back to the negative trend after an upbeat February. For the first quarter of 2005, the average domestic stock fund lost 2.6%, underperforming the S&P 500-stock index, which fell 2.3%.

In March alone, domestic equity funds lost 1.9% on average, after gaining 2.0% in February. In January, they shed 2.7%, contributing to the suffering in the quarter. All fund categories ended the quarter in the red. Small-cap funds, which have dominated over the past few years, underperformed large-company funds. Small-cap growth funds were hardest hit of all, shedding 4.9% in the first three months of 2005.

The best performing fund for the quarter was Rydex Dynamic Funds:Venture 100 Fund/H (RYVNX, which gained 19.1%. The large-cap “bear” portfolio is designed to rise when its benchmark falls. Notwithstanding, Roseanne Pane, Mutual Fund Strategist at Standard & Poor’s, expects that large-cap companies will do relatively better in 2005 since “they can weather a rising rate environment better than smaller companies.” Large companies can also benefit in an environment when the dollar falls since they have more international exposure, she added.

Investor concern over U.S. inflation, rising interest rates, and slowing earnings growth provoked negative results for the last three months. Rising oil prices also took a toll on the markets as oil reached record highs during the quarter. Crude oil futures dipped as low as $41.25 (January 3) and rose as high as $57.60 per barrel (March 17). Sam Stovall, chief investment strategist at Standard & Poor’s, said “oil prices could correct to the $50 area, after which we expect the longer-term bullish trend to reassert itself.”

Also during the quarter, the Federal Reserve raised the federal funds rate 25 basis points to 2.75%, signaling it may be more aggressive in using rates to curtail inflation. According to Stovall, the removal of the ‘pace that is likely to be measured’ phrase would set the Fed up for a 50 basis point increase at the June meeting. “We still expect to end the year with a federal funds rate near 4%, but will probably get there faster than expected,” he added.

In terms quarterly sector performance, energy rose 17.1%, and utilities 4.4%, putting them at the top end. However, telecom services fell 8.6%, information technology shed 7.5%, and financials lost 7.0%, making them the worst performers for the three month period.

Despite a rough start to the first quarter, Standard & Poor’s analysts project operating earnings for the S&P 500 will advance 9% for the period year-over-year. For year-end 2005, Standard & Poor’s investment policy committee still has a target of 1300 for the S&P 500.

Below is a list of the best- and worst-performing domestic stock funds according to style category for the first quarter of 2005.

Fund Investment Style

Average Returns First Quarter 2005 (%)

Average Returns March 2005 (%)

Large Cap Growth



Large Cap Value



Large Cap Blend



Mid Cap Growth



Mid Cap Value



Mid Cap Blend



Small Cap Growth



Small Cap Value



Small Cap Blend



All Cap Growth



All Cap Value



Domestic Equity Funds*



S&P 500-Stock Index



Domestic Equity Funds* — First Quarter 2005 Returns

Best Individual Performer

Returns (%)

Worst Individual Performer

Returns (%)

Large Cap Growth Rydex Dynamic Funds:Venture 100 Fund/H (RYVNX) +19.05 Ameritor Investment Fund (AIVTX) -27.27
Large Cap Value ING Corporate Leaders Trust Fund Series B/A (LEXCX) +6.08 American Heritage Growth Fund (AHEGX) -14.29
Large Cap Blend ProFunds:UltraBear/Iv (URPIX) +5.21 Grand Prix Super Core Fund/C (SCCFX) -12.42
Mid Cap Growth Hennessy Focus 30 (HFTFX) +8.38 AllianceBernstein Mid-Cap Growth/C (CHCCX) -12.21
Mid Cap Value CGM Capital Development Fund (LOMCX) +8.86 PIMCO Funds:PEA Renaissance/C (PQNCX) -7.39
Mid Cap Blend Fidelity Leveraged Company Stock (FLVCX) +4.67 Ameritor Security Trust Fund (ASTRX) -11.36
Small Cap Growth Bull Moose Growth Fund (BULLX) +2.71 Apex Mid-Cap Growth Fund (BMCGX) -27.93
Small Cap Value CGM Focus Fund (CGMFX) +10.95 Tocqueville Small Cap Value Fund (TSCVX) -15.29
Small Cap Blend ProFunds:UltraShort Small Cap/Inv (UCPIX) +11.48 ProFunds:UltraSmall Cap/Sv (UAPSX) -12.48
All Cap Growth Quaker Capital Opportunities Fund/A (QUKTX) +4.61 Reynolds Fund (REYFX) -22.29
All Cap Value Diamond Hill Focus/A (DIAMX) +6.73 Matthew 25 Fund Inc (MXXVX) -8.25
Domestic Equity Funds* — March 2005 Returns Best Individual Performer Returns (%) Worst Individual Performer Returns (%)
Large Cap Growth Rydex Dynamic Funds:Venture 100 Fund/H (RYVNX) +3.92 Ameritor Investment Fund (AIVTX) -11.11
Large Cap Value Concorde Value Fund (CONVX) +0.86 American Heritage Growth Fund (AHEGX) -14.29
Large Cap Blend Rydex Dynam:Inv Dyn Dow/A +5.07 Grand Prix Super Core Fund/C (SCCFX) -8.80
Mid Cap Growth Gartmore Millennium Growth/D (NMCGX) +0.70 Eaton Vance Growth/B (EMGFX) -6.39
Mid Cap Value PIF MidCap Value/I +1.09 CGM Capital Development Fund (LOMCX) -6.41
Mid Cap Blend Westport Fund/I +3.80 Security:Mid Cap Growth Fund/C (SUFCX) -5.13
Small Cap Growth Van Wagoner Post-Venture Fund (VWPVX) +0.70 Kopp Emerging Growth Fund/C (KEGCX) -10.69
Small Cap Value Longleaf Partners Small Cap Fund (LLSCX) +1.63 James Advantage Small Cap Fund (JASCX) -5.56
Small Cap Blend Potomac Small Cap/Short/Investor (POSSX) +7.63 Bridgeway Fund:Ultra Small Company Fund (BRUSX) -6.48
All Cap Growth Boyar Value Fund (BOYAX) 0.00 Reynolds Fund (REYFX) -7.57
All Cap Value Third Avenue Value Fund (TAVFX) +1.47 Eastern Point Adv Cp Ap/C -5.87

*Excluding sector and balanced funds.

Source: Standard & Poor’s. Total returns include reinvested dividends. Preliminary data as of 3/31/05.

Contact Bob Keane with questions or comments at:[email protected].