Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SUNDAY, April 15, 1990 TAG: 9004110663
SECTION: BUSINESS PAGE: A13 EDITION: METRO
SOURCE: BY STAN HINDEN THE WASHINGTON POST
DATELINE: LENGTH: Medium
Hardest hit in the first quarter were the Pacific-region funds that invest in Japanese and other Asian stocks. Those funds fell an eye-popping 13.1 percent as the Tokyo stock market made its long-awaited plunge.
U.S. investors lost both on the drop in Japanese stock prices and the drop in the yen against the dollar.
About the only bright spot for investors was the science and technology funds, which stood against the tide and gained 2.7 percent.
The newly popular European region funds also made it into the plus column, but barely, with a gain of 0.82 percent.
Otherwise, red ink was everywhere, reflecting the weakness in the stock and bond markets, which in turn reflected the slowing of the national economy and uncertainty over interest rates and inflation.
General stock funds lost 2.3 percent during the first quarter, which ended March 31. The loss came on the heels of a 1.2 percent slide in stock fund prices that took place during the final quarter of 1989.
The slide began after a mini-crash on Oct. 13 reawakened investors' fears about market volatility. Even with the end-of-year drop, however, stock funds chalked up a 24 percent annual gain because of strong market activity earlier in 1989.
Meanwhile, funds that invest in bonds and other fixed-income securities also dropped in value during January, February and March, falling 2.3 percent.
Michael Lipper, guru of the mutual fund industry, said he thought the slowdown in mutual-fund gains was "healthy," because the funds had gone too far, too fast. He said he was pleased to see the funds' performance return to more normal patterns. Lipper is head of Lipper Analytical Services, which monitors the performance of 1,780 stock and bond funds.
Looking ahead, the veteran market-watcher said he would not be surprised to see a dramatic move. "We're in a period of low volume and high anxiety," Lipper said. "The market could spike in either direction."
Because of investor uncertainty, Lipper added, a sudden movement in one direction could easily gather enough momentum to push the market dramatically higher or lower.
Compared with the closely watched national averages, general stock funds did better than the Standard & Poor's 500, which lost 3 percent, with dividends reinvested. But the stock funds did not beat the Dow Jones industrial average, which lost only 0.69 percent, also with dividends reinvested.
Don Phillips, editor of Mutual Fund Values, said mutual fund investors were displaying a certain amount of "schizophrenia." On one hand, he said, investors were pouring money into money-market funds in what appeared to be a flight to safety.
On the other hand, he said, there has been a great rush to invest in "high-concept gimmicks," such as environmental cleanup funds and Europe 1992 funds.
"I see this tone as being somewhat disturbing," said Phillips, who suggested that investors were better off in more broadly based equity funds.
On the loser's list, the fund that lost the most in the first quarter was the Nikko Japan Tilt Fund, a New York-based Japanese index fund that dropped almost 30 percent. The reason for the big loss, said portfolio manager Yoichi Kuwata, was that the fund did what it was supposed to do - it matched the performance of the Japanese stock market.
Of the loss, 72 percent was due to the drop in stock prices, 28 percent to the drop in the Japanese yen, Kuwata said.
The top-performing fund, with a 19.2 percent gain, was the Strategic Gold-Minerals Fund, a $4 million Dallas-based fund that got a big boost when the shares of Akiko-Lori Gold Resources Ltd. rose 300 percent after the mining company said it found gold near Red Lake, Ontario, Canada. Meanwhile, Strategic Silver was No. 7 on the winner's list.
If that was good news for Grant Brenna, who manages those portfolios, he also had some bad news. His $60 million Strategic Investments Fund was third on the loser's list with a loss of 21.1 percent.
Strategic Investments puts its money in South African gold mine shares, Brenna said. The fund dropped sharply when Nelson Mandela, who favors nationalization of the mines, was released from prison. The fund also was hurt by the Saudi Arabian sale of 2 million ounces of gold to buy British sterling.
One of the winning technology funds was T. Rowe Price's Science & Technology Fund, managed by Roger B. McNamee. The first-quarter environment "was a lot friendlier and computer stocks rebounded from excessively low valuations," McNamee observed. The computer stocks had fallen so low they were selling at price-earnings ratios of between 7 and 10, in a market where the average is about 15.
by CNB