In the second quarter of 2011, investors focused their attention on weaker economic growth, continuing sovereign debt concerns in Europe and supply-chain disruptions caused by Japan’s devastating earthquake. “As a result, equity funds were down 0.20 percent for the quarter ended June 30, 2011 — their first quarterly loss in four,” says Tom Roseen, head of research services for Lipper.
In addition, Lipper preliminary data shows equity mutual fund investors were net redeemers of equity fund assets in the period and pulling out an estimated $0.8 billion from the conventional funds business (excluding exchange-traded funds). For May and June, on renewed interest in income plays, investors added more money to bond funds and injected some $46.1 billion net into fund coffers, though also withdrew some $5.3 billion from the municipal-bond fund group.
In the second quarter, the Greek Parliament passed a nearly $41-billion budget austerity package to help the country avoid default on its debt, and the markets then had a four-day winning streak. This helped push Lipper’s world-equity funds macro-classification up 0.53 percent for the period. This performance topped that of the U.S. diversified-equity funds group (-0.35 percent) and sector-equity funds (-0.79 percent), along with the mixed- equity fund category (+0.37 percent).
Equity funds fell an average of 1.63 percent in May and 1.81 percent in June, Lipper says, but April’s 3.31 percent positive return “helped mitigate downside exposure for the quarter.” In June, just 4.2 percent of all equity and mixed-asset funds posted positive returns, and only 48 of Lipper’s 86 equity and mixed-equity fund classifications posted positive returns for the full second quarter.
By sector, global-health and biotech funds improved 7.29 percent, domestic health and biotech funds ticked up 6.82 percent, and consumer-goods funds rose 4.45 percent, “as investors took a more defensive stance in the market,” explains Roseen. Among the laggards, “old favorites” like India-region funds (-2.63 percent) and China-region funds (-2.23 percent) were among the cellar dwellers. Precious-metals funds declined 7.98 percent, while commodities/energy funds moved down 7.96 percent and commodities/agriculture funds 7.23 percent.