Markets at Midyear 2008 - Of Mutual Interest with Christine Benz
Friday, July 04, 2008PAUL KANGAS: This year's carnage on Wall Street as well as the fall in the dollar and the rise in commodity prices all came across loudly and clearly in the prices of mutual funds, so in tonight's "Of Mutual Interest" segment, we take a look at the few bright spots in fund performance over the past three months and joining us to discuss that is Christine Benz, director of personal finance for Morningstar. Christine, welcome back to NIGHTLY BUSINESS REPORT.
CHRISTINE BENZ, DIR. OF PERSONAL FINANCE, MORINNGSTAR: Paul, it's nice to be here, thank you.
KANGAS: First let's look at which fund sectors did the best between April and June and not surprisingly at the top were the natural resource funds with 19.6 percent gain followed by Latin American stock funds up more than 12 percent. Is there a connection here?
BENZ: Absolutely. The Latin American economies and their markets tend to be very much driven by natural resources, not just oil but also basic materials like metals. When those commodities are up, so are the Latin American markets.
KANGAS: Interesting. Now let's turn to the top individual funds during the quarter and among the funds with more than $50 million in assets, heading the list Blackrock Global resources. How did it turn in a gain of better than 45 percent?
BENZ: Well, owning a lot in the energy sector and in particular, Paul, this fund made a very profitable bet on the coal industry and coal prices really surged during the quarter. So did this fund.
KANGAS: They sure did. And it's interesting that Fidelity and Rydex energy service funds also made it to the best performance list.
BENZ: These types of funds, Paul, will shoot to the top of the charts when oil stocks are performing particularly well. I would point out they also tend to be on the bottom of the heap when oil's fortunes turn down.
KANGAS: Now moving to the best performer over the last year, we see a repeater from the quarterly board -- Oppenheimer commodity strategy total return. What can you tell us about this fund?
BENZ: This is a commodity fund that tracks an index of various commodities, mainly oil and related products, but also metals and some agricultural products and as we have all seen, the prices of everything has been surging recently. These commodities have done well and this fund mirrors their gains.
KANGAS: Now taking a longer-term view, ING Russia continued as the top fund for the last three years with an annualized return of more than 49 percent.
BENZ: Right. A perennially strong performer over the past few years, really as go oil prices so goes Russia. This fund turns on both -- on the success of both areas.
KANGAS: Now finally, looking at the biggest funds in terms of assets, it's interesting that one fund actually ended the quarter in the black. That was Growth Fund of America. How did it manage to buck the trend?
BENZ: Well, one thing, Paul, it is what it avoided, which is the financial sector. As we all know, banks and a lot of other financial services companies have had a terrible time of it amid this mortgage crisis that we've had here in the U.S. This fund, Growth Fund of America tends to downplay those companies relative to some of the other biggies on this list like Vanguard's big 500 index, so it's been what it has avoided more than what it has owned.
KANGAS: OK, now, talking about growth funds, it's interesting to note that the midcap growth and small cap growth categories experienced solid gains after big drops in the first quarter. Are these groups that tend to lead the general market?
BENZ: They do. They tend to certainly lead the market when the economy is recovering. I think it's probably premature to say that we definitely are entering a recovery, but typically these groups will lead the way.
KANGAS: Very interesting, Christine and as always thank you for your analysis.
BENZ: Thanks so much, Paul.
KANGAS: My guest, Christine Benz, director of personal finance for Morningstar.
