Strength Across the Board
Funds specializing in gold and other precious metals glittered in the third quarter,
but many other stock and bond categories also performed exceptionally well.
By Laton McCartney
The world of investing looks much brighter than it did a mere three months ago, and third-quarter mutual fund returns reflect that. “The market today is awfully strong across the board,” says Russel Kinnel, director of mutual fund research
For the most part, both U.S. and European equity funds registered
sharp upticks, Kinnel notes. “In addition,” he adds, “bonds and munis have done pretty well.” About the only investment category that
didn’t fare well was long-term government funds.
Of the 20 largest equity funds Morningstar tracks, Dodge & Cox Stock
generated the highest return, 8.03%, for the third quarter and a stellar one-year return of 31.89%. Five other funds in
this group produced quarterly returns of
more than 7%: Dodge & Cox International
Stock, up 7.41%; American Funds Growth
Fund of America, 7.36%; Fidelity Growth
Company, 7.3%; American Funds EuroPacific Growth, 7.24%; and Oppenheimer
Developing Markets, 7.11%.
At the other end of the spectrum,
real estate and Japanese funds were
heavily represented among the worst-performing equity funds. Five of the 10
funds with the biggest declines in the
quarter were Japanese stock funds, headed by GMO Flexible Equities
III, which slipped 4.12%. Analysts cite long-term currency concerns as
one of the factors behind this downturn.
After a torrid recent stretch, some of the real estate vehicles apparently were coasting during the third quarter. The worst return among
real estate funds was turned in by CGM Realty, with a quarterly decline
of 1.84%. Overall, the worst performance of the quarter among equity
issues, a drop of 5.93%, was turned in by Fidelity Select Transportation,
a decline that Morningstar in part attributes to disruptive outflows.
Led by GMO Emerging Country Debt III, up 10.29% for the quarter,
seven of the top-performing fixed-income funds were emerging mar-
ket vehicles. Hampered by the Fed’s pledge to keep interest rates low
for the next few years, U.S.-based fixed-income funds registered nega-
tive numbers, with long-term government-bond
funds like PIMCO Extended Duration Treasury
(down 1.27%) and Vanguard Extended Duration
Treasury (down 0.72%) taking the biggest hits.
Five of the 10 funds
with the biggest
declines in the third
funds. Analysts cite
concerns as one of
Laton McCartney is a New York writer who has
contributed to Money Management Executive
and Information Management.
November 2012 Financial Planning 115