Despite the damage done by the subprime meltdown and credit crisis, most
Natural resource funds did the best, gaining an average of 37%, followed by utility funds, up 20%, and technology funds, up 16%.
Funds that invested in financials – such as banks, bond insurers and brokerage firms – fell an average of 11.7%, according to Morningstar Inc.
Real estate funds dropped an average of 14.6%, despite a direct exposure to mortgages or residential real estate.
International stock funds posted an average gain of 16%, their fifth consecutive year of double-digit gains, Morningstar said. Strong growth in
Several highly regarded mutual fund managers had their reputations tarnished by the crisis, including Oakmark’s Bill Nygren, Legg Mason Value’s Bill Miller, Selected American Shares’ Chris Davis and Clipper Fund’s Ken Feinberg, said Jeremy DeGroot, chief investment officer with Litman Gregory Asset Management.
“We think they are highly skilled, very smart investors,” DeGroot said. “They had poor performance last year due largely to their exposure to housing/mortgage related companies.”
Nygren, who also manages Oakmark Select, saw one of his largest holdings, Washington Mutual, fall nearly 70% last year.
“He clearly underestimated the risk of a housing decline and the impact that would have" on Washington Mutual, DeGroot said.
These managers made mistakes, DeGroot said, but most believe the sell-off in financials is over and many are already adding to their positions.
The top-performers in the fixed-income category were inflation-protected bond funds, with an average gain of 10%. These funds, which invest in Treasury Inflation Protected Securities, benefited from falling interest rates.
Long-term government funds also did well, posting an average return of 9.8%.
Fixed income had the worst performance of bank loan funds, up an average of 1.1%, followed by ultra-short-term bond funds, up 2.5% on average.