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Equity Funds (Barely) Stay in Black as Bond Funds Plummet in Q2: Lipper

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Though they declined 2.1% in June, equity funds remained in the black for the second quarter, returning 0.31% and producing a fourth consecutive quarter of plus-side returns, according to Lipper’s latest research.

U.S.-diversified equity funds improved 2.29% on average versus a decline of 2.20% on average for world equity funds.

“Although many stocks set new highs during the quarter, investors turned their attention to domestic, quasi-defensive, and out-of-favor issues,” explained Tom Roseen, head of research services for Lipper, in a report released on Tuesday.

Commodities specialty funds improved 7.38% in the April-to-June period, followed by consumer services funds at 6.20%. Health/biotechnology funds gained 4.97%, and financial services funds ticked up 4.93%.

On the downside, precious metals equity funds declined a whopping 35.02% — the worst performer in the equity universe, according to Lipper. This was driven in large part by the 23.26% drop in the price of gold.

Value-focused funds produced returns of 3.13% on average in Q2 versus returns of 2.48% for core funds and 2.4% for growth funds.

In June, the top-performing funds included short-bias products at 3.73% and Japan-focused equity funds at 2.28%.

Bond Bust

During the second quarter, “Bond funds of all flavors had their worst quarter since Q3 2008 during the depths of the credit crisis,” said Jeff Tjornehoj, head of research for Lipper Americas in another report released Tuesday.

Of the 6,010 bond funds tracked by Lipper, 5,931, or 98.7%, posted a loss in June.

The worst-performing group in the taxable-bond funds universe in the second quarter was the emerging-markets local currency debt funds family, which lost 7.4%. Municipal debt funds also were crushed for the quarter and lost an average of 3.32%.

“The widely watched Barclays US Aggregate Bond index slumped 2.33% for Q2 for its worst quarter since 2008,” Tjornehoj said. “Bond fund investors may have looked longingly at the great numbers put up by equity funds this past quarter, but they should recall that volatility differences between the two asset classes remain wide and equity risk remains substantially higher than bond risk.”

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