Stock mutual funds crunched in 2008; only bear funds positive for year
NEW YORK -- There was one safe bet that mutual fund investors could make in 2008 — that the stock market was a place to lose a lot of money.
Funds' performance stats for the year to date show that Wall Street's decline was so punishing that investors had almost nowhere to hide. A majority of fund categories had negative returns in the neighborhood of 40%, and some categories dedicated to financial services and natural resources had negative returns of 50% or more, according to Lipper, which tracks fund performance.
Lipper, whose tallies reflect trading through Wednesday's session, found that the category of bear market funds, which wager that stocks will fall, was the only fund category that offered positive returns for the year or the fourth quarter.
So-called short-bias funds returned an average 36.16% for the year and 11.77% for the October-to-December quarter. The funds profit by correctly betting that a stock will fall.
The results confirm what many investors already know from their 401(k) account statements and from tracking the market's major indexes. The Standard & Poor's 500 index, which is the benchmark for many funds, was down 40.88% through Wednesday, while the Dow Jones industrials were down 36.16%.
"This is the kind of market where investors throw out relative performance," said Lipper analyst Jeff Tjornehoj. "Was there really much of a difference between a fund that was down 40% and one that was down 43%? Not really."
Wall Street's heaviest selling came in September and October after the bankruptcy of Lehman Bros. The brokerage's collapse under the weight of soured investments triggered a freeze-up of lending and deepened Wall Street's fears about the depths of the recession.
The numbers would have been worse if the market hadn't rallied in the past month from the multiyear lows set Nov. 20; the S&P 500 has rebounded 16% since then. Investors pulled less money out of equity and bond funds in November than in October.
Although Lipper's figures don't include the last four trading days of the year, the funds' performance isn't likely to change substantially.
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