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Kathy Panagopouloskathy.panagopoulos@morningstar.com
All That Glitters May Be Gold for Second-Quarter Fund Performance--But Will It Last?

CHICAGO, Jun 28, 2002 – Chicago-based Morningstar, Inc., a leading investment research firm, today released its second-quarter funds summary in its special Quarter in Review section on Morningstar.com.

"Gold and real-estate funds fared the best as investors sought the safety of hard assets," said Russel Kinnel, director of mutual fund analysis for Morningstar. 

Second Quarter 2002 Fund Performance Highlights
(data through Thursday, June 27, 2002):

  • Bond funds outperformed stock funds in most categories. Every bond category posted gains for the period, except emerging markets and high yield.     
  • Domestic-stock funds lost 12 percent during the last three months. International-equity funds shed more than 5 percent and domestic-hybrid funds dropped 6 percent for the period.     
  • Precious-metals sector funds continued their rally as the best-performing mutual fund group, rising almost 14 percent for the quarter, and 54 percent for the year to date. The sector also finished as the best mutual fund category in the first quarter 2002 and for the full-year 2001.     
  • The real estate fund category was the only U.S. stock fund group to finish the three-month period in the black, gaining nearly 4 percent.     
  • The technology fund and the communications fund categories were the worst-performing sectors, each losing 28 percent for the quarter. 

The Best
"Fears that the economic recovery is sputtering, volatile equity markets, accounting and corporate governance scandals, and a weakening dollar have all helped buoy gold prices this year," Kinnel added. 

Top-performing precious-metals funds during the quarter include U.S. Global Investors World Precious Minerals (UNWPX), up 36 percent, U.S. Global Investors Gold Shares (USERX), gaining more than 24 percent, and Van Eck Investors Gold (INIVX), increasing 20 percent.

Investors searching for bear-market havens have also bolstered returns of real estate sector funds. Some of the best-performing funds in this sector include Security Capital European Real Estate (SEUIX), which rose 14 percent, Morgan Stanley Institutional European Real Estate (MSUAX), which increased 13 percent, and Alpine U.S. Real Estate Equity (EUEYX), which gained 10 percent.

International bond and long-term government bond funds offered some of the best returns among fixed-income fund groups, rising nearly 7 percent and 4 percent, respectively. The most interest-rate-sensitive funds did the best during the second quarter. 

The Worst
Every other domestic-fund category lost money during the last three months, but none lost more than technology and communications sector funds. Both categories lost nearly 28 percent for the quarter and more than one-third of their value for the year to date. 

"Almost everything that has gone wrong for tech and communications stocks and funds during the past two years continued to go wrong," Kinnel said. "Some managers are telling us they're still bearish on the sectors for the rest of the year." 

The poorest technology funds of the quarter included Van Wagoner Technology (VWTKX) down almost 40 percent, ProFunds Ultra Internet (INPSX), losing nearly 48 percent, and Black Oak Emerging Technology (BOGSX), dropping 47 percent.

The worst communications funds during the trailing three months were ProFunds Ultra Wireless (WCPSX), falling 58 percent, ProFunds Ultra Telecommunications (TCPSX), losing 39 percent, and the Wireless Fund (WIREX), down nearly 36 percent.

The worst international fund category during the past three months was the Latin America-stock fund group, losing 20 percent. The loss was due to a debt and currency crisis in Brazil. Funds at the bottom of the sector include Morgan Stanley Latin America (LATBX), Van Kampen Latin America (MSLCX), and Evergreen Latin America (EKLBX).

Emerging-markets bond funds were the worst fixed-income category, falling more than 6 percent. Offitbank Emerging Markets Select (OFFMX) shed nearly 12 percent, SEI International Emerging Markets Debt (SITEX) lost almost 9 percent, and JP Morgan Fleming Emerging Markets Debt (JEMDX) dropped 8 percent. 

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


To read the "Second Quarter in Funds," go to:

To read the "Second Quarter in Stocks," go to:

Editor's Note: If you are interested in receiving weekly, monthly, and quarterly e-mails on stock and mutual fund data, contact: Annette Larson, Morningstar Media Relations, annette.larson@morningstar.com. Preliminary quarter-end data will be distributed Monday, July 1, 2002.

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