In the third quarter of 2011, equity funds posted declining results for the second quarter in a row and dropped 17.44 percent, reports Lipper, with world-equity funds (–20.44 percent) trailing three other broad Lipper categories: mixed-equity funds (–10.08 percent), U.S. diversified-equity funds (–16.67 percent) and sector-equity Funds (–15.36 percent). The Dow Jones Industrial Average moved down 11.49 percent in the period, as the NASDAQ fell 12.91 percent and the S&P 500 dropped13.87 percent (as measured on a daily basis with reinvestments).
“Sovereign debt concerns, slowing global growth and a weakening U.S. dollar pushed some old favorites to the bottom of the pack,” says Tom Roseen, Lipper’s head of research services, in his third-quarter analysis.
Funds focused on China dropped 25.59 percent, while Latin American funds fell 25.36 percent. For the second consecutive quarter, according to Lipper, large-cap funds “mitigated losses better than the other capitalization groups;” they moved down 15.41 percent vs. small-cap funds decline of 21.75 percent.
On the plus side, dedicated short-bias funds improved 29.82 percent, while commodities-specialty Funds ticked up 1.17 percent. They produced the only positive returns among Lipper’s equity fund groups.
“Continued sovereign debt concerns of EU member nations, slowing global growth, and U.S. partisan gridlock on Capitol Hill set the stage for the worst quarter for equity funds since fourth quarter 2008,” explains Roseen. Year-to-date returns for equity funds were –13.57 percent for the first nine months of the year.
“Despite plenty of liquidity in the market and forecasts for a relatively strong third-quarter earnings reporting season — according to Thomson Reuters’ Proprietary Research group, the estimated earnings growth rate for the S&P 500 for Q3 was 13.7 percent — investors remained pensive about the lack of sound leadership from governing bodies and a spate of downgrades by rating agencies, including that of U.S. sovereign debt,” the analyst explains.