Dan Culloton: Over the last quarter, we've seen international funds do better than domestic funds, small-cap funds do better than large-cap funds, and growth funds do better than value funds. This continues a trend that we saw over the last year.
Among international funds, the rising dollar has tempered returns somewhat; however, we've still seen very strong absolute performance from funds that focus particularly on Japan and India. In fact, Matthews India (MINDX) and Matthews Japan (MJFOX), two Bronze-rated funds, were among the best-performing funds in the manager-research coverage universe.
On domestic shores, small-cap growth was the best-performing category, but also funds that had healthy allocations to health care and, particularly, biotech stocks did very well. A case in point is Century Small Cap Select (CSMVX), which not only is a small-cap growth fund but also had a very healthy weighting of health-care stocks. In fact, seven of its 10 top-performing stocks of the quarter were from the health-care sector.
Another strong-performing small-cap growth fund was Wasatch Small Cap Growth (WAAEX) and it was helped by a 10% stake in India--which was, of course, one of the best-performing international areas as well.
Among the poorer-performing funds of the quarter were funds that were focused on commodities, energy, and Latin American stocks. But we also had some high-conviction value managers who lagged for a variety of reasons. For example, FBA Capital (FPPTX), which held a lot of cash--about 25% of its assets--and a lot of energy, performed poorly relative to its peers and in absolute terms it was down about 2%.
David Winters at Wintergreen Fund (WGRNX) also underperformed, largely because of positions in gaming stocks such as Wynn Macau and Galaxy Entertainment.
Yacktman Fund (YACKX) also underperformed. They had some losing positions in large-cap media stocks, consumer-products stocks, and tech stocks.
A word of caution about quarter-end results: Three months is a very short and noisy time over which to evaluate a fund. It's really not very predictive of long-term performance. You're really better off making sure at the end of each quarter that you are investing with managers who have enduring strategies and strong long-term track records.