High-flying aggressive growth mutual
funds have lost more than a quarter of their value over the past
five weeks, in another glaring sign of the rush to dump
technology stocks, mutual fund data showed on Friday.
Scott Olson /Reuters
|Traders shout while signaling bids and offers at the Chicago Board of Trade
The drop in aggressive growth was the most severe aspect of
an across-the-board fall in U.S. mutual funds in the last week,
with nearly all categories showing losses and overall returns
moving into bear territory for the first time this year.
Fund industry professionals said the recent volatility in
financial markets was likely to continue, but investors should
avoid selling in a panic. They believe funds were likely to post
gains for the year.
But in the short term, investors could be in for more
white-knuckled days. The Nasdaq was off more than four percent
on Friday, bringing the technology laced index's loss to some 30
percent since its March 10 peak.
The pull-back in aggressive growth funds has in five weeks
nearly matched the three-month decline triggered in 1998 by the
Russian debt default and Asian financial troubles.
From July to October of that year, aggressive growth mutual
funds dropped 35.69 percent, according to data from Moody's
Investors, compared to a drop of 28.20 percent from March 10 of
this year through April 13.
The average U.S. diversified stock mutual fund is down 0.11
percent for the year, data from Lipper Inc. showed.
"That's the nature of the beast we say risk, we say
diversify," said Louis Harvey, president of fund research firm
Dalbar. "It certainly is no time to panic. I have been saying
that volatility is going to continue."
Lipper data showed declines in all growth funds outpacing
drops in all other categories. Science and Technology sector
funds were down 16.17 percent for the week through April 12,
leading drops in all other sectors, and 6.56 percent year-to
date, Lipper said.
Telecommunications funds were the second biggest losers of
the week, down 11.42 percent for the week and 5.11 percent
Despite the broad decline, data from fund tracker TrimTabs
showed stock mutual funds had inflows of $14.3 billion over the
five-day week ending April 12, compared to outflows of $1.8
billion in the prior week.
Real estate funds rose for the week, with Lipper data
showing a 2.17 percent rise. Pacific funds that exclude Japan
were up 0.44 percent and China region funds eked out a 0.22
percent gain for the week.
Dave Jellison, who manages the $245 million Columbia Real
Estate Equity fund, said he had seen positive money flows in the
last few weeks and good gains in his fund, but he said real
estate fund managers were not gloating.
"Two-and-a-half years of a bear market, which is where REIT
funds have been, teaches you humility," he said. Year-to-date,
the fund is up 7.95 percent after a 2.5 percent loss last year
and a drop of 12.3 percent in 1998, according to financial
information firm Morningstar.
Harvey said he expected equity mutual funds to be volatile
but to return to their usual 8 to 10 percent in 2000.
"I expect them to rebound as vigorously as they go down. I
suspect that at the end of the year you will see some returns,
but in Getting there you will see volatility.
"I expect equity funds to post normal returns this year,"