Stock Funds Slip Nearly 3 Percent
Mar 2 12:07pm ET
NEW YORK (Reuters) - The U.S. economy may be climbing out of recession, but most of the nation's stock mutual funds are still languishing with heavy losses.
Most categories of U.S. stock portfolios lost money in February, extending the year's declines, as the stock market fell on persistent worries about shady bookkeeping and mounting corporate debt.
This year began on a sour note when investors, rattled by the collapse of energy trader Enron Corp. , began to worry that other firms might also have inflated profits through dubious accounting methods, portfolio managers said.
"We found one serial killer, so the market thought there must be another one out there," said William Batcheller, fund manager at National City Investment Management, which manages $28 billion in assets. "If it turns out that there is another fraudulent company out there, it will get worse for us."
Many of the growth-oriented funds that stumbled in 2001 fell again in February, while value funds -- packed with stocks considered bargains -- also slipped, but less severely.
The average diversified stock fund fell about 2.9 percent in February, according to preliminary data from fund researcher Lipper Inc., a division of Reuters Group Plc .
The Dow Jones Industrial average <.DJI> rose 1.9 percent for the month, but the Standard & Poor's 500 Index <.SPX> dropped 2.1 percent and the Nasdaq <.IXIC> lost 10.5 percent.
In January the average diversified U.S. stock fund fell 1.83 percent.
The declines follow steep losses last year. U.S. diversified equity funds, which invest in an array of sectors and account for about three-quarters of U.S. stock fund assets, lost an average 10.9 percent in 2001, according to Lipper.
Other managers trust stocks will rise again as Enron- related jitters subside. Richard Calvert, who runs the $651 million AmSouth Value Fund, said one of his big holdings, power producer Mirant Corp. , has been unfairly clobbered by Enron fallout, along with other companies.
"All this will come to pass once everyone settles down," Calvert said.
Closer scrutiny of accounting practices -- the Enron effect -- also helped overshadow more positive economic news that seems to suggest a recovery may be nearing.
New data showing a quick liquidation of inventories suggest the economy is firming again and some managers look for more jobs to be created in the months ahead.
But the outlook remains cautious and managers agreed there will be no quick fix for their market's malaise. A recovery, they added, is likely to unfold slowly.
"The signals are pretty clear that we're working toward a (economic) recovery," said Michael Byrum, executive vice president of fund company Rydex Global Advisors. "The question is, how sustainable is it? And how robust will it be?"
With few changes in the scenery in the last months, the mutual fund winners and losers came in as expected in February.
Small-cap value funds, which soared 16.4 percent in 2001, rose 0.5 percent in February, according to Lipper. Investors have flocked to small-cap stocks considered cheap. The sector was out of favor amid the tech stock run-up of the late 1990s.
Gold funds, a niche sector with only about $1.9 billion in assets, gained 10.4 percent in February after gaining 11.5 percent in January, bringing 12-month gains to 40.7 percent.
Growth funds continued to struggle. Large-company growth funds declined 4.5 percent in February after falling 2.3 percent in January, bringing 12-month losses to 18.3 percent. Mid-cap growth funds dipped 5.5 percent during the month.
Telecommunications funds, once the market's darlings and now among its biggest losers, fell 11.7 percent in February, bringing 12-month losses to 44.6 percent.
reuters.com |
