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Equity Funds Have Strong Q1’11, Lipper Data & Analysis Show

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Equity funds posted their third-consecutive quarter of plus-side returns, gaining 5.14 percent in the first quarter of 2011, reports Tom Roseen, a senior analyst with Lipper. For Q1 2011, 73 of Lipper’s 79 equity-fund classifications posted positive returns, he adds.  For the second-consecutive quarter, U.S. diversified-equity funds (up 6.04 percent) outpaced sector-equity funds (which rose 5.67 percent), mixed-equity funds (up 3.66 percent) and world-equity funds (that ticked up 2.60 percent).

In fixed income, headline risk kept most bond fund groups in the black at the end of the first quarter, notes Jeff Tjornehoj, head of Lipper Americas Research. Long-term Treasury and some, but not all, municipal-debt fund groups were the quarter’s worst performers, he explains, badly trailing riskier high yield and flexible income strategies.

As for fund flows, investors turned their focus to equity mutual funds, and that group ended the first quarter of 2011 with net inflows of $57 billion, according to Matthew Lemieux, a Lipper research analyst. “This was quite a turnaround from the $12.1 billion in outflows posted the previous quarter,” he says. Taxable fixed income also did well, adding $36.2 billion in flows, bolstered by heavy interest in both loan-participation funds (with inflows of $14.4 billion) and multi-sector income funds ($8.1 billion).

Equity Funds

In January, equity funds gained 1.15 percent, with 84 percent of equity and mixed- equity funds posting positive returns, according to Lipper research. The Dow moved up 2.72 percent and Nasdaq gained 1.78 percent, and the markets produced their eighth-consecutive week of upside performance. The month’s leaders in early 2011 included natural-resource funds, up 5.15 percent. Gold funds dropped 10.78 percent, however.

In February, equity funds moved up 3.13 percent, with 94 percent of all equity and mixed-equity funds expanding their returns. The Dow and Nasdaq improved roughly 3 percent.  “Despite disappointing non-farm payroll news, Libya’s civil war and China’s 50 basis point rise in reserve requirements, investors remained upbeat,” Roseen shares.

The month’s developments also encompassed the resignation of Mubarak in Egypt and a rise in M&A deals. Gold funds gained 10 percent, in the face of political unrest, while natural resource funds moved up 6 percent.

In March, which included the tragic earthquake, tsunami and nuclear reactor problems in Japan, equity funds had a nearly 1 percent rise, with 71 percent of equity and mixed-equity funds in the black. Emerging-market funds rose 5 percent.

Overall for the quarter, natural-resource funds improved 13.66 percent and global natural-resource funds ticked up 9.31


percent. Gold funds dropped 0.45 percent. Within the world-equity group, EU-themed funds jumped 5.31 percent. Mixed-asset funds increased an average of 3.66 percent.

In January, high-yield funds rose better than 2 percent. They ticked up nearly 1.3 percent in February, when munis improved close to 1.6 percent and high-yield funds rose nearly 1.3 percent. In March, it was emerging-markets bond funds that topped the charts, with an improvement of 1.8 percent.

Future Concerns

Investors are closely watching earnings, and the markets are now focused on higher energy and raw material costs, Lipper analysts say. Oil prices, the devastation in Japan, unrest in the Middle East and North Africa, the European debt crisis, and monetary tightening in China are key influencing factors being watched, along with unemployment figures, housing inventories and other real-estate market developments.

As for flows, equity funds (excluding ETFs) have drawn more than $50 billion in the first three months of 2011. Fixed-income funds have attracted more than $34 billion, but money-market funds have lost $80 billion ­— with the bulk of these outflows taking place in January.