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For all of the talk about individual stocks and ETFs, mutual funds are still the largest component of many individual retirement and savings portfolios. With thousands of open funds and upwards of $10 trillion in assets under management, this is obviously a market segment that deserves attention. To that end, then, it is worth exploring where mutual fund investors saw the best returns for 2011.
By Stephen D. Simpson, CFA
Stephen D. Simpson, CFA, is a freelance financial writer, investor, and consultant. He has worked as an equity analyst for both sell-side and buy-side investment companies in both equities and fixed income. Stephen's consulting work has focused primarily upon the healthcare sector, while he has also written extensively for publication on topics pertaining to investments, security analysis, and healthcare. Simpson operates the Kratisto Investing blog, and can be reached there.
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This analysis includes only funds that are open to new investment, have minimum initial investment requirements below $10,000 and assets under management of at least $100 million.
A Bull Year in BondsI do not recall all that many pundits from December 2010 telling investors that U.S. government bonds were going to be the place to be for 2011. And yet, that's what has happened. With the Fed pulling every rabbit out of its hat to keep rates low and the economy slouching forward, U.S. government bond funds have been strong this year.
The Rydex Government Long Bond 1.2x Strategy (Nasdaq:RYGBX) fund (and its share class siblings) takes the top spot for 2011, up more than 41% on a year-to-date basis. This is not your regular fund, though. RYGBX looks to produce 1.2 times the price performance of long-dated Treasury bonds and does so with investments in futures, swaps and options. (For related reading, see An Introduction To Swaps.)
Wasatch-Hoisinton US Treasury (Nasdaq:WHOSX) is another winner, but perhaps a bit more conventional. With over $200 million in assets, this fund is up nearly 32% for the year, following a strategy of buying long-duration U.S. government bonds.
A host of municipal, long-term bond and inflation-protected bonds funds also ended the year with top-tier performances for 2011.
Strength in Sector PlaysApart from funds invested in government bonds, there was also strength in dedicated sector plays. The FBR Gas Utility Index Fund (Nasdaq:GASFX) rode the strength in natural gas distribution companies like El Paso (NYSE:EP) and Williams (NYSE:WMB) to a nearly 20% return this year. On the opposite side of the risk spectrum, the Fidelity Select Biotechnology (Nasdaq:FBIOX) delivered better than 16% returns this year.
Discretionary FundsInvestors have to travel a long way down the list of performers before the more traditional actively-managed funds are found (at least those that don't invest in particular market or industry categories). The Federated Strategic Value Dividend (Nasdaq:SVAAX) fund has delivered better than 10% performance this year, while the well-known Sequoia (Nasdaq: SEQUX) is up more than 12%.
Outside the U.S., the BlackRock Global Dividend Income (Nasdaq:BABDX) fund is up about 5% for the year, while the Dreyfus Worldwide Growth (Nasdaq:PGROX) fund is about 2% for the year.
The Bottom LineThe absence of generalist funds at the high end of the performance lists is nothing new; top performance is increasingly dominated by risky sector/strategy-specific funds. It is also worth noting that the best actively-managed general equity funds were up only about 10% or so for the year - further proof that this was a difficult year to find profits in the markets. (You might be carrying more risk than you think if your fund invests in derivatives. For more, see Is Your Mutual Fund Safe?)
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At the time of writing, Stephen Simpson did not own shares in any of the companies mentioned in this article.
By Stephen D. Simpson, CFA
Stephen D. Simpson, CFA, is a freelance financial writer, investor, and consultant. He has worked as an equity analyst for both sell-side and buy-side investment companies in both equities and fixed income. Stephen's consulting work has focused primarily upon the healthcare sector, while he has also written extensively for publication on topics pertaining to investments, security analysis, and healthcare. Simpson operates the Kratisto Investing blog, and can be reached there.
Filed Under: Mutual Funds,Stock Analysis
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