Booming Treasury funds, Vanguard gets its S&P 500 ETF, stock-fund flows make a U-turn, and more.
I hope you like surprises, because there have been a more than a few for fund investors so far this year. Here, in no particular order, are some of the biggest as of mid-2010.
A Big Dog's Moving In
Maybe an old dog can learn new tricks. The oldest index mutual fund in the world, Vanguard 500
Billion Dollar Man
There was applause when Jeffery Gundlach told an audience of advisors at the 2010 Morningstar Investment Conference last week that his new flagship fund, DoubleLine Total Return
Hello. I Must be Going.
Little more than a year after taking over Janus Worldwide
The liquidation of a $60 million fund doesn't normally cause a tremor in the nearly $10 trillion mutual fund business. Kevin O'Boyle's March decision to shutter his Presidio Fund caught our attention, though. O'Boyle, who had not been afraid to question conventional wisdom in his short career, challenged it one more time as he took a bow. The fund had been competitive since its May 2005 birth and earned 5 stars, but it never attracted much money. O'Boyle, however, said it was flagging passion, not cash flows, that caused him to shut down. He said he could have trundled along earning a comfortable six-figure salary as long as the fund's assets stayed above $50 million, which is about half of what funds need to break even, or so fund-industry conventional wisdom has long said.
Year of the Living Treasuries
Late last year I helped survey dozens of global fund managers from all over the world for their views on current and prospective market conditions. I don't recall any of them saying long-term U.S. Treasuries looked attractive. Granted, few probably expected them to suffer the kind of losses they endured in 2009, but with Treasury yields still at generational lows, no one I spoke with expected the long-government fund category to post the kinds of returns it has so far this year. Through June 29, it was the best-performing fund group of 2010, with a gain of more than 15%. Funds that lost astonishing amounts by bond-fund standards last year, such as Vanguard Extended Duration Treasury
All that Glitters
At the start of the year we also heard from a few managers who were adding gold to their portfolios either as a hedge against catastrophe or, with money market rates close to zero, as a substitute for cash. We also heard from some who pointed out that buying the notoriously unpredictable metal as insurance when its five-year returns were high was perilous. If so, it's probably more perilous now. Gold has continued to rally, trading above $1,250 an ounce at times during June and helping to push the equity precious-metals category to a more than 10% year-to-date return through June 29. Funds such as Tocqueville Gold
Gold bullion ETFs also have rallied. The ETF commodities precious-metals category is also up 10% year to date, and SPDR Gold Shares
Investors seemed to be warming up to U.S. equity funds in March and April after 12 months of gains following March 2009's low. Domestic-stock funds took in $885 million and $6.4 billion in inflows in March and April, respectively. Fund buyers cooled off in a flash in May, though. After the May 6 flash crash, in which the market lost and regained roughly 1,000 points in the time it takes for a potty break, investors flushed nearly $15 billion out of U.S. stock funds in May, an abrupt U-turn that has fund executives such as Vanguard Chairman and CEO Bill McNabb worried that the industry has lost a generation of investors.