After a three-month hiatus, small cap and midcap funds re-emerged as the cream of the crop in the top 25 best performers among equity mutual funds most-used by defined contribution plans in the year ended June 30.
But while stock prices surged nearly across the board in the second quarter as investors cheered the faint whiffs of an economic recovery, funds' one-year losses were still considerable, with only nine reporting losses of less than 20% for the 12 months.
Seven of the top 25 were small-cap funds, six were midcap and six were large cap, according to data from Morningstar Inc., Chicago. Growth, value and blend funds were also split evenly among the top 25.
The universe for the quarterly performance ranking is drawn from an annual survey of mutual fund companies that report their equity, bond, money market and asset allocation funds ranked by defined contribution assets (Pensions & Investments, April 20).
T. Rowe Price Associates Inc., Baltimore, took the top spot among the equity funds for the second quarter in a row with its T. Rowe Price Capital Appreciation fund, which had a one-year return of -13.94% as of June 30.
David Giroux, manager of the Capital Appreciation fund, said the fund is overweight utilities, industrials and has a modest overweighting in the consumer discretionary sector. Also, as in the first quarter, the fund is "overweight energy stocks in general, although we have reduced the beta a little in that sector," he added. The fund is underweight technology.
The fund had a 62% allocation to equities, 11% in convertibles, 19% in bonds and 8% in cash as of June 30, he said.
A moderate allocation (balanced) fund, it is one of the four T. Rowe Price funds in the top 10, with the others being the T. Rowe Price Midcap Value, ranking sixth with a one-year return of -18.77%, the T. Rowe Price Small Cap, ranking seventh with -18.82%, and the T. Rowe Price New Horizons ranking 12th with -20.74%.