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Morningstar Calls 2001 a Year of Rational Pessimism, Reflects on Grisly Bear Market for Growth and Technology Funds

CHICAGO, Dec 28, 2001 – Morningstar, Inc., a leading provider of investment information and analytical tools, today released its year-end summary, "Style Universe: A Year of Rational Pessimism," in its special 2001 Year in Review section, which can be found at http://www.morningstar.com, the firm's investment Web site.

"Small-cap funds and the real-estate sector were the big winners in 2001," said Morningstar Managing Director Don Phillips. "The bear market proved to be grisly for once-high-flying growth funds and technology funds." 

2001 Performance Highlights (data through Thursday, Dec. 27):

  • The small-cap value category was the top performer -- posting a 17.48 percent gain for the year.                 
  • The real-estate category had the second-best performance with an 8.74 percent gain.                 
  • The small-cap blend and mid-cap value categories also managed to stay in the black, with 8.61 percent and 6.26 percent returns, respectively.                
  • Technology funds were the big losers this year, with a 37.70 percent loss, followed closely by communications, with a 35.36 percent loss, and large-cap growth funds with a 23.14 percent loss.

Top-Performing Funds
Four of the top five performing U.S. stock funds for the trailing 12 months fall into the small- cap category: Schroder Ultra SMCFX increased 74.27 percent; Corbin Small-Cap Value CORBX gained 54.72 percent; Wasatch Micro Cap WMICX returned 53.23 percent; and Boston Partners Small Cap Value II BPSCX posted a 50.57 percent increase. Ameristock Focused Value AMFVX, a mid-cap value fund, rounded out the top five with a 61.64 percent gain. 

Because small-cap value funds posted strong returns in 2001 and attracted so much new money, several fund families closed their doors to new investors in order to control their asset bases: Berger Small Cap Value BSVIX, Wasatch Small Cap Value WMCVX, American Century Small Cap Value ASVIX, and Boston Partners Small Cap Value II. 

Within the real-estate fund category, real-estate investment trusts (REITs) have attracted mutual fund managers because they performed relatively poorly in 1998 and 1999, and the stocks looked undervalued in 2000. Investors looking for a strong dividend yield and relative safety from the reeling stock market jumped into REITs, helping them post gains in 2001 even as most stock market segments tanked. Specialty real-estate offerings Kensington Strategic Realty KSRAX, Spirit of America Investment SOAAX, and Alpine U.S. Real Estate Equity EUEYX all managed to post gains of 25 percent or more this year.

Worst-Performing Funds
The five worst-performing funds fell into two categories -- technology or large-cap growth. ProFunds Ultra Internet INPIX, a technology fund, topped the list as the worst-performing U.S. stock fund for the trailing 12 months with a 78.03 percent loss. ProFunds Ultra OTC UOPIX, a large-cap growth fund, was on its heels, losing 73.86 percent. The remaining three funds in the worst-performance category all tumbled at least 70 percent: Technology funds Berkshire Focus BFOCX and Berkshire Technology BTECX fell 72.56 percent and 72.10 percent, respectively. Large-cap growth fund Rydex Velocity 100 RYVYX dropped 71.32 percent. 

For the most current data on more than 13,000 funds and 7,000 stocks, as well as in-depth analysis on the year's top investing news, go to Morningstar's 2001 Year in Review section:

http://www.morningstar.com/QtrEnd/CoverQ401.html

Other columns include: 

How America's Biggest Funds Fared in 2001
http://news.morningstar.com/doc/article/0,1,11634,00.html

The Best and Worst New Funds of 2001
http://news.morningstar.com/doc/article/0,1,5767,00.html

Foreign Fund Insight: Optimism and Dejection in 2001
http://news.morningstar.com/doc/news/0,2,11655,00.html

Tips for Tax-Conscious Fund Investors
http://news.morningstar.com/doc/article/0,1,5802,00.html

Year-End Financial Planning Tips
http://news.morningstar.com/doc/article/0,1,5710,00.html

Editor's Note: If you are interested in receiving weekly, monthly and quarterly e-mails on mutual fund and stock data, contact: Annette Larson, Morningstar Media Relations, annette.larson@morningstar.com. Preliminary 2001 year-end data will be distributed on Jan. 2, 2002.

About Morningstar, Inc.
Chicago-based Morningstar, Inc. is a leading provider of investment information. Morningstar offers an extensive line of print, software, and Internet-based products and services for individuals, financial advisors, institutions, and the media. The company is a trusted source for investment information, data, and analysis of stocks, mutual funds, exchange-traded funds, closed-end funds, and variable annuity/life subaccounts.

Morningstar.com is listed among the top investing sites by publications such as The Wall Street JournalBarron'sMoneyWorth, and U.S. News & World Report. Morningstar provides investment information for a number of leading Web sites, including Microsoft MoneyCentral, Quicken.com, America Online, Yahoo! Finance, and Netscape Personal Finance.

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