Fighting the tide aided fund investors in 1Q

By STAN CHOE, Associated Press Published: April 6, 2014
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It’s after the crowd thins that the party gets interesting.

Such was the case with mutual funds last quarter. The types of funds that did best were often those that investors rushed to exit in 2013. Mutual funds that invest in the stocks of mining companies were the headliners: They made an average of 12.1 percent, the most among the 103 fund categories that Morningstar tracks and more than six times the return of the Standard & Poor’s 500 index. The jump came after investors pulled a net $2.1 billion from the category last year. The top of the leaderboard for first-quarter fund returns provides another example of how sharply fortunes can swing.

Many of the top-performing fund categories in the first quarter were ones that tend to be popular when worries are rising, such as gold-related and bond funds. Investors have felt more reason to worry this year as concerns flared about tensions in Ukraine and about disappointing economic reports in China and the United States. The VIX, an index that measures how nervous investors are about big price swings upcoming for the S&P 500, jumped in February to its highest closing level since 2012.

Even though the S&P 500 index had its smallest quarterly move in the last six, various mutual fund categories still posted big moves in both directions.

“I think we’re into a stock picker’s market and a bond picker’s market and a country picker’s market,” says Jack Rivkin, chief investment officer at Altegris, which runs several alternative mutual funds. Unlike last year, when 91 percent of the stocks in the S&P 500 rose together, Rivkin says, “we’re going to see some difference in performance among individual countries, individual sectors and individual companies.”

Here’s a look at some of last quarter’s biggest winners and losers.

Winners

Gold mining stock funds

Last year, when the price of gold had its worst annual performance since 1981, the average precious metals stock fund lost 48.8 percent.

But managers say that helped make gold-mining stocks look more attractive, and they bounced back even higher than the price of gold.

Of the 25 mutual funds at the top of the rankings for first-quarter returns, 12 specialize in gold-mining stocks.

Municipal bond funds

Detroit’s bankruptcy filing last year spooked investors away from municipal bonds, which are issued by local governments.

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