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Mutual Funds  
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Funds in 1Q: Finally some good news
International funds, many U.S. stocks funds, show gains in the first three months.
April 5, 2002: 6:18 PM EST
By Martine Costello, CNN/Money Staff Writer

NEW YORK (CNN/Money) - Battered mutual-fund investors got their first dose of good news in nearly two years.

International funds logged solid gains and many U.S. stock fund categories edged up in the first quarter, according to preliminary figures from Morningstar. The results are raising hopes for a bull market later this year -- and perhaps a rally for growth stocks, which have been suffering mightily.

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"What you're beginning to see is a restoration of investor confidence after two tough years," said Burton Greenwald, a fund analyst based in Philadelphia.

Finally, some positive numbers

Among the best performers, every type of international stock fund made money, according to Morningstar. At the top of the list were precious-metals funds, up 35.2 percent, driven by the strong performance of gold and mining companies. The funds are part of the international set -- many of the companies span the globe. (Click here for more on gold funds.)

Emerging markets funds, too, have been on a tear, rising 11.8 percent in the quarter. Funds that invest in Asia, excluding Japan, rose 9.6 percent, and even beat-up Japan funds edged up 2.6 percent.

  graphic  International funds are big winners:  
  
Precious metals, up 35.2 percent
Emerging markets, up 11.8 percent
Pacific Asia/excl. Japan, up 9.6 percent
Latin America, up 8.7 percent
Japan, up 2.6 percent
Europe, up 0.9 percent
World, up 0.8 percent
Source: Morningstar (Data as of 3/28)
  

Morningstar's William Samuel Rocco attributed the strong performance to optimism about economies such as Korea and Mexico. International funds also benefited if they could avoid the financial fallout from troubled Argentina.

Top performers among international funds include First Eagle SoGen Gold, up 50.4 percent, and Fidelity Advisor Korea, up 27.7 percent, Morningstar said.

Within the U.S. market, the top performer was natural resources funds, up 12.1 percent. Rising energy prices and a rebounding economy were big factors. (Click here for more on energy funds.)

Other hot sectors include real estate funds, up 8 percent, and financial funds, up 4.6 percent. (For more on real estate funds, click here, and for more on financial funds, click here.)

Top funds include Ivy Global Natural Resources, up 23 percent, and Babson Enterprise, a small value fund, up 16.9 percent.

  graphic  Winning U.S. stock-fund categories:  
  
Natural resources, up 12.1 percent
Small value, up 8.7 percent
Real estate, up 5.3 percent
Mid value, up 4.8 percent
Small blend, up 4.6 percent
Financial, up 4.6 percent
Source: Morningstar (Data as of 3/28)
  

Value funds continued their two-year winning streak, with small-cap value up 8.7 percent, mid-cap value up 5.3 percent, and large-cap value, up 1.9 percent, according to Morningstar.

The biggest losers were communications funds, down 16.7 percent, and tech funds, off 7.5 percent. Health funds, despite showing signs of life recently, also ended the quarter down 7.5 percent. (For more on health funds click here.)

Growth remained under water, with small growth down 1.4 percent, mid-growth off 2.3 percent and large growth losing 2.7 percent. Still, analysts said a rebounding economy could give growth funds a shot in the arm because it will mean stronger corporate earnings.

"I think the first quarter is encouraging," said Sheldon Jacob, editor of the newsletter No-Load Fund Investor. I think you're going to get a bull market later this year...and when we do get a bull market, leadership will switch to growth and Nasdaq stocks. Maybe even telecoms."

A changing scenario for bonds

Of course, the good news didn't really reach the fixed-income side of the Street. Bonds, which are at the end of a long rate-cutting cycle, were stung last week when the Federal Reserve hinted it might raise rates down the road. Short-term bond funds just about broke even, but intermediate-term bond funds lost 0.2 percent and long-term bond funds gave up 0.5 percent, according to Morningstar.

The winners among bonds were the two categories that act the most like stocks: emerging-markets bond funds, up 6.6 percent, and high-yield, up 0.8 percent.

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Picking the perfect fund
Funds: What's hot, what's not
Three can't-fail funds
  

Top performers include Scudder Emerging Markets, up 9 percent, and Salomon Brothers High-Yield, up 4.4 percent.

With fixed-income looking lukewarm at best, Greenwald said fund investors are taking a serious look at equities for the first time in a long time. On top of that, investors are coming off a terrible two years that followed the most robust bull market in a generation.

"It's a perilous time to be going back into fixed income," Greenwald said. "Rates aren't going to go lower."  Top of page






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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.