“Despite the old adage of ‘sell in May and go away,’ investors kept the pedal to the metal in the second quarter, pushing the average equity mutual fund three-month return to 4.04%, with equity funds posting their eighth consecutive quarter of plus-side returns,” explained Tom Roseen, head of research services for Lipper in Denver, in a report released in early July.
The second quarter, though, was a bumpy one, as violence in Iraq upset investors and pushed oil and gold prices higher. Still, by the end of June, dovish comments by the Federal Reserve and other factors propelled the S&P 500 to its 22nd record close for the year and the NASDAQ to its strongest finish in 14 years.
Equity funds had their eighth consecutive quarter of positive performance, with average returns of 4.04% in the period. Sector equity funds outperformed the group, with a 5.62% gain. Meanwhile, world equity funds rose 4.46%, U.S. diversified equity funds improved 3.42%, and mixed- asset funds ticked up 3.32%.
As for the losing groups, dedicated short-bias funds dropped 9.57%, commodities-agriculture funds fell 5.72%, commodities-specialty funds dipped 0.60%, and alternative-equity/ market-neutral funds declined 0.11%. India-region funds topped the equity charts, rising 18.26%.
Fund flows in the quarter, though, were negative as investors took about $2.7 billion out of their conventional funds, excluding exchange-traded funds. However, they “padded the coffers” of some fund categories on a net basis, Roseen says, and put $26.6 billion into conventional equity funds, $33 billion in taxable fixed-income funds and $5.4 billion in municipal bond funds.