Fund Times

Funds on the Upswing in 2009

Katie Rushkewicz Reichart, CFA

Thankfully, the first half of 2009 has been a lot less gut-wrenching for fund investors than the end of 2008. Many funds started bouncing back after the market hit its recent low on March 9, and all diversified domestic-stock categories, with the exception of large-blend, have posted gains in the year to date through June 24.

With the midyear mark fast approaching, it's worth taking a look at diversified funds that have rebounded significantly in 2009. Many of this year's leaders were laggards during 2008's market meltdown, losing significantly more money than their peers. In fact, eight of the 10 top-performing diversified domestic-stock funds in 2009 were in the bottom decile of their respective categories in 2008. Tellingly, the standard deviation of returns for all of these funds are above their respective category averages, suggesting that performance swings aren't all that unusual for this bunch.

 Top-Performing Diversified Funds in 2009


YTD Return 2008 Annual
% Rank
Direxion NASDAQ-100 Bull 2.5X (DXQLX)
Large Growth
39.66 -82.75 100 58.3
Ancora Special Opportunity ANSCX
Small Value
38.66 -45.77 96 29.16
Elite Growth & Income ELGIX
Large Blend
35.94 -50.32 97 30.15
Rydex Dynamic NASDAQ-100 2X St (RYVYX)
Large Growth
35.27 -72.76 99 46.66
ProFunds UltraNASDAQ-100 (UOPIX)
Large Growth
34.59 -72.64 99 46.38
William Blair Small Cap Growth (WBSNX)
Small Growth
34.18 -46.85 88 25.85
Van Kampen Equity Growth VEGAX
Large Growth
31.59 -50.7 96 24.55
Touchstone Large Cap Value TLCAX
Large Value
31.22 -73.79 99 38.22
Royce Select II RSFDX
Small Blend
30.06 -33.31 30 26.74
AIM Mid Cap Basic Value MDCAX
Mid-Cap Blend
29.91 -51.38 94 30.14

One fund that stands out is Royce Select II Investment RSFDX, run by Chuck Royce and James Harvey. The fund lost less money than 70% of its small-blend peers in 2008 and is leading the category so far this year, up 30%. It's worth noting that this fund has a $50,000 minimum and is only for qualified investors, and it's also run a bit differently than other Royce funds in that it can short stocks.

Of course, the fact that these funds are doing well now is by no means reason to run out and buy them. Investors shouldn't make too much of short-term gains, which aren't predictive of long-term success. A fund's long-term track record, volatility, strategy, and management are more important factors to consider.

Putnam Ponders Hedge Funds
Putnam CEO Robert Reynolds has announced plans to launch hedge funds at the firm within the next year. Reynolds said that he'd look to in-house managers to run the new funds, particularly those who have previous experience in that area. The foray into hedge funds is the latest in a string of trendy fund launches that Reynolds has overseen since taking over as CEO of the troubled firm a year ago. Others include global sector funds and absolute return funds.

Seligman/RiverSource Merger
The $93 million RiverSource Partners Small Cap Growth AXSCX will merge into the $36 million Seligman Frontier SLFRX, pending shareholder approval. Seligman's 1.97% expense ratio is currently higher than RiverSource's 1.59%, but a public filing states that the firm will waive certain fees until May 31, 2010, so that net fund expenses, excluding fees and expenses of acquired funds and before giving effect to any performance-incentive adjustment, will not exceed 1.51% for Class A. The fund will still be run by Michael Alpert and Stephan Yost.

Leveraged ETFs Face New Scrutiny
Regulatory oversight group FINRA recently warned investors about the risks of leveraged exchange-traded funds and called on financial advisors to do a better job at checking for client suitability. Read director of ETF analysis Scott Burns' take here.

Delafield Sale
New York-based Tocqueville Asset Management LP has bought Delafield Asset Management, a small fund shop that's currently a division of Reich & Tang Asset Management, LLC and an affiliate of Natixis Global Asset Management. J. Dennis Delafield and comanager Vincent Sellecchia, who have run  Delafield (DEFIX) since 1993 and also work on the newly launched Natixis Delafield Select DESAX, will stay at their posts.

Name Changes
Large-blend fund  Principal West Coast Equity (CMNWX) will become Principal Capital Appreciation at the end of June and will broaden its mandate. Going forward, the fund will be able to invest across the United States rather than focusing on companies headquartered in California, Oregon, Washington, and Alaska. Many regional funds have expanded their mandates over the years or no longer exist, but there are a few still out there. Hancock Horizon Burkenroad (HHBUX) is a small-blend fund that invests in companies doing business in Alabama, Florida, Georgia, Louisiana, Mississippi, and Texas.  Mairs & Power Growth (MPGFX) and  Mairs & Power Balanced (MAPOX) largely focus on companies located in or around Minnesota, although they aren't required to do so by mandate.

Effective July 1, 2009, four Lord Abbett funds will change names, though the strategies and investment teams will remain intact. Lord Abbett America's Value  (LAMAX) will change to Lord Abbett Capital Structure;   Lord Abbett Large-Cap Core  LRLCX will transition to Lord Abbett Classic Stock (its expense ratio will also drop to 0.98% from 1.30%);   Lord Abbett All Value  (LDFVX) will become Lord Abbett Fundamental Equity; and Lord Abbett Large-Cap Growth  LALCX will change to Lord Abbett Stock Appreciation.






Katie Rushkewicz Reichart, CFA does not own shares in any of the securities mentioned above. Find out about Morningstar's editorial policies.