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Lipper Looks at Q4 Results

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Equity funds may have had a “ho-hum” quarter in the last three months of 2014, but market conditions were anything but average, according to Tom Roseen, head of research services for Lipper. Equity funds ticked up 1.92% on average in Q4’14, Roseen explained during a recent webinar. Meanwhile, the price of oil fell 40.41%, gold dropped 2.33%, and the U.S. dollar rose 4.24% against the euro as well as 9.19% vs. the yen.

“There was increased volatility,” said Roseen. “But the icing on the cake [for upside performance] was the quantitative easing announced by China, Japan and Europe. At first, investors were excited, and then they maybe saw this as a sign of global slowing, which kept some [investors] at bay.”

Equity funds tracked by Lipper rose 1.68% in October and 1.02% in November, only to fall 0.93% in December.

Top, Bottom Performers

U.S. diversified equity funds improved 4.60% in Q4, while world equity funds declined 2.57% in the period. Some stand-out sector fund groups were real estate, up 13%; short, leveraged and other commodity strategies, up 10.75%; and health care, up 10%.

Commodity-energy funds dropped off 29.93%, as natural resource funds declined 18.01% and global natural resource funds fell 14.59%. Mixed-asset funds, including target-date products, improved 1.18% in Q4 and 4.33% for the full year.

“Equity investments were popular, and interest-seeking investments were popular, too,” explained Roseen. “People put money into small-cap funds, but large-cap funds were actually the long-term winner, as a vehicle for safety on the domestic side.”

For the quarter, the performance of small-cap growth funds was up 8.1%, and small-cap core funds rose 7.18%. Overall, the small-cap fund category increased 7.4% in the fourth quarter. Growth funds ticked up 5.5%, according to Roseen.

During 2014, U.S. diversified equity funds rose 7.56% on average. “Again, risk-averse investors turned away from the global sector” and turned to domestic funds, he explained.

World-equity funds were down 2.24% for the year, according to Lipper data, while the average sector fund grew 6.13% in 2014. “There is a lot of concern out there in the markets over whether there is a global slowdown or not,” Roseen said. “Still, China region funds were up 4.88% for the [fourth] quarter.”

Outlook, Concerns

“The market is a bit long in the tooth,” he cautioned. “Data from Thomson Reuters sees 97 negative estimates and 19 positive estimates for earnings increases in Q4’14.” Overall, corporate earnings are expected to improve 4% in Q4’14, according to estimates tallied by Lipper’s parent firm.

“Recall that China, Japan and the European Central Bank have been cutting rates,” Roseen explained. “That was a good thing, and we will keep an eye on the ECB in the coming days and weeks, especially with respect to deflation.”


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