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May 01, 2010 at 04:00 AM
“Equity funds strung together their fourth consecutive quarter of plus-side returns during first quarter 2010, posting a 4.64 percent return despite losing ground in January,” said Tom Roseen, Lipper’s research manager for the United States and Latin America in Denver, in his March 31 analysis.
According to Lipper, U.S. diversified-equity funds (or USDE) posted the strongest quarterly return for the first quarter in 24 with a boost of 5.67 percent. This means the group outpaced sector-equity funds (3.90 percent), mixed-equity funds (3.49 percent) and world-equity funds (2.30 percent).
In the first quarter of 2010, 70 of Lipper’s 78 fund classifications had plus-side returns. Dedicated short-bias funds, of course, had losses of 8.86 percent, making this group the biggest loser for the fourth consecutive quarter.
In early 2010, U.S. diversified-equity funds and sector-equity funds topped the charts, while world-equity funds were at the bottom. Strong sector-fund performers included financial-services funds, up 11.54 percent, and Japan funds, up 7.53 percent.
Fund Flows
Fund investors were net redeemers in the first three months of the year — taking some $167.3 billion out of conventional funds. However, a sea change may have begun, Lipper says.
For the fourteenth month in a row, money-market funds had strong outflows, but equity and fixed-income attracted investor assets. In 2009, investors put $5.50 into bond funds for every $1.00 they invested in equity funds.
Not so this year. During the first quarter that ratio fell to $2.77 for every $1.00 invested in equity funds. “Not only did investors step up their contributions into equity funds, they also changed their favored type of equity funds,” Roseen explained.
Whereas in earlier years, sector-equity and world-equity funds were most popular, this year domestic-oriented and non-domestic equity funds did equally well in the first three months.
In January, equity-fund returns declined close to 4 percent, but in February they rose nearly 3 percent. March saw them jump above 6 percent. Thus, 91 percent and 98 percent respectively of all equity funds and mixed-asset funds posted plus-side returns, Lipper research shows.
