Four Big Mutual Fund Surprises of 2009
Two happy surprises and two disappointments.
What a remarkable time to be an investor. First, you suffer through the worst bear market since the Great Depression, then you experience one of the best spurts ever. The rally--Standard & Poor's 500-stock index soared nearly 63% between March 9 and Nov. 19--has been strongest among some of the areas that were hardest hit in 2008. In the fund world, this translates into the worst-shall-be-first effect: Many of last year's weakest performers are among this year's best. And many of last year's winners are this year's dogs (see bear-market funds, for instance).
Some funds, however, managed to perform well (on a relative basis at least) both this year and last, and others were stinkers both years. Let's look at some of these surprises.
The managers of Brown Capital Management Small Company (BCSIX) are remarkably patient. With annual portfolio turnover typically on the order of 10%, we can rule out the notion that they rode last year's best-performing sectors (the ones that lost the least) and then hopped onto real estate and China this year. In fact, the managers, led by Keith Lee, just held on to the same small but fast-growing companies they've had for years. This steady approach means they are likely to stick with a company even when it hits a pothole and are unlikely to sell a stock because it has risen a lot. The fund's lack of energy stocks helped it keep its losses to 30% in 2008; solid sales and profit gains among its holdings helped propel the fund to a nearly 35% gain this year. Brown Small Company's long-term record is excellent, although it achieves its returns in fits and starts.
Russel Kinnel has a position in the following securities mentioned above: OAKLX. Find out about Morningstar’s editorial policies.