Don’t bank on upbeat indicators, experts say

Mar 30, 2009 @ 3:27 pm

By Sue Asci

There's some good news about mutual funds returns and other economic indicators, but it's not yet time to start popping Champagne corks, industry experts say.

Large- and mid-cap growth, emerging markets and some high-tech sector funds were among the categories with preliminary positive returns in the first quarter ended March 31, according to recent data from Lipper Inc. of New York collected through March 26.

The federal stimulus bill may be a factor at work, said Tom Roseen, a senior research analyst at Lipper.

“We have seen the velocity of money picking up,” he said.

“Money is not just sitting in the banks. There are some encouraging pieces here. We may be starting to claw our way out [of the recession]. But whether this has legs, I don't know.”

In addition to fund performance, other positive signs in recent weeks included a rise in new home sales.

In the year-to-date performance data estimated through March 26, Lipper found that gold funds returned 14.16% and global natural resources had a return of 2.16%.

Oil prices have started to rise again, which has had an impact on commodities, Mr. Roseen said.

Some sector funds also performed well, including science and technology with a 7.79% return, telecommunications with 3.12%, and global science and technology with 8.32%.

“Growth seems to be the benefactor of this,” Mr. Roseen said.

Large-cap growth funds posted a loss of 0.14%, compared to a loss of 32.89% for the one-year trailing period.

And mid-cap growth returned 0.28%, compared with a loss of 36.27% for the one-year trailing period, Lipper found.

Emerging markets may benefit from the beating they took last year, Mr. Roseen said.

“There is deep-discount buying going on, and buying into some smart areas,” he said.

China region funds had a return of 4.05%, Latin America funds posted a return of 9.28% and Pacific ex Japan funds had a return of 2.12% for the first quarter.

Advisers are watching returns, but noted it's too early to say the markets are on an upward trajectory.

A handful of actively managed fund investments did doing better in the first quarter, said Jeff Bernier, chief executive at TandemGrowth Financial Advisors LLC of Roswell, Ga., which manages $55 million in assets.

“Large growth has been doing much better. And we've got a position in an emerging-markets fund which as done incredibly well, compared to international."

Treasury inflation protected securities have also performed well in the last couple of months, Mr. Bernier added.

A few months of relatively positive data is not cause to call a turnaround, said Judith Seid, owner of Blue Summit Financial Group Inc. of La Mesa, Calif., which manages $60 million in assets.

“There was a lot of activity both up and down in the first quarter,” she said. “The market is still very volatile.”

Investors are still holding back, Ms. Seid said. "People are waiting to see what's gong to happen with the bailout and which auto manufacturers are still going to be in business," she said.

A slow economic recovery could make a case for the use of more actively managed funds, Mr. Bernier said.

“The higher-quality stock, chosen from active management, will make the difference as opposed to the average stock, which is what you get in the index,” he said.

“The impact of active management might add value. There are certain companies that can grow fast.”


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