Small, midcaps top DC mutual fund performance charts

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%.

Ranking second overall for the second quarter in a row was the Fidelity Advisor Small Cap fund, with a one-year return of -17.71%. Four other Fidelity funds made it into the top 25: the Fidelity OTC Portfolio, at -20.49%; the Fidelity Small-Cap Stock, -21.55%; the Fidelity Low-Priced Stock, -22.01%; and the Fidelity Dividend Growth, -23.34%.

Two American Funds offerings ranked third and fourth for the quarter: New Economy returned -17.98% and AMCAP, -18.21%. Both are large-cap growth funds.

Rounding out the top five was the Perkins Mid Cap Value Fund with a one-year return of -18.49%.

In the universe of fixed-income funds most used by DC plans, PIMCO's total return funds took the top three spots. As of June 30, PIMCO Total Return II had a one-year return of 9.57%; PIMCO Total Return had a one-year return of 9.27%; and PIMCO Total Return III had a one-year return of 9.15%.

PIMCO also had two additional funds in the top 25 bond funds, with the PIMCO Moderate Duration Fund ranking 12th with a one-year return of 7.82%; and the PIMCO Long-Term U.S. Government fund ranking 19th with a one-year return of 7.27%.

Rounding out the top five were the TCW Total Return Bond fund at 8.78% and the Fidelity Ginnie Mae fund at 8.69%.