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Lipper Says "Ouch" as Equity Funds Post Poor Returns

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Last year, equity funds posted their worst one-year return (-39.54 percent) in Lipper’s database, which began in 1959, notes Tom Roseen, senior research analyst of Thomson Reuters Lipper in Denver. In 1974, equity funds shed 24.35 percent of their value.

As for the fourth quarter 2008, also the worst in the database (when equity funds declined 23.41 percent), December brought the first monthly gain (up 4.09 percent) since May 2008.

In the first 11 months of 2008, investors took some $150 billion out of equity and mixed-equity funds, while adding about $28.5 billion to bond funds and $530.8 billion to money market funds, says Roseen. Investors added roughly $410 billion net to mutual fund coffers from January to November.

For the fourth quarter, just 1.4 percent of all equity and mixed-equity funds had positive returns, with only 1 of Lipper’s 78 equity classifications managing to post plus-side performance: dedicated short-bias funds, up 4.60 percent. For the year, this group rose 27.31 percent.

As for sector funds, the “best performers” in 2008 were health/biotechnology funds (-22.99 percent) and global health/biotechnology funds (-24.35 percent), which “mitigated losses better than all other classifications in this macro-group.”

For the fourth quarter, world-equity funds’ returns ranged from minus 12.66 percent (Japan funds) to minus 39.47 percent (Latin American funds). And for the year, the world-equity funds macro-group declined a whopping 45.80 percent.

The mixed-equity funds macro group (-15.55 percent) mitigated losses better than Lipper’s other three macro-classifications in the fourth quarter, Roseen says. The group comprises primarily life cycle funds (target-date and target-allocation funds, which generally have a mix of both stocks and bonds). For the first 11 months of 2008, this group attracted the only positive net flows for the equity universe: net $20.6 billion.

Still, with the exception of mixed-asset target allocation conservative funds (-9.34 percent for the quarter), the performance losses for the group were “somewhat perplexing, since many of the near-dated funds, such as 2010 and 2015 funds, should have been gearing down to more conservative allocations,” notes Roseen.

Lipper’s Top 10

The performance of the 10 largest funds (including mutual funds and ETFs) in 2008:

SPDR Trust, SPY (-36.97%)

American Funds Growth; AGTHX (-39.07%)

American Funds Cap Income, CAIBX (-30.06%)

American Funds Cap World G&I, CWGIX (-38.38%)

Fidelity Contrafund, FCNTX (-37.16%)

American Funds Invest Comp, AIVSX (-34.73%)

American Funds Income, AMECX (-28.86%)

American Funds Wash Mutual, AWSHX (-33.10%)

Vanguard 500 Index, VFINX (-37.02%)

Vanguard Total Stock Index, VTSMX (-37.04%)


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