Takeovers Give Equity Funds a Boost

U.S. equity funds rose 4.8% in the second quarter thanks, in part, to a recent spate of corporate takeovers, according to Bloomberg News.   Energy-oriented funds also did well, while real estate funds lagged. With more than $1.5 trillion in merger and acquisition deals in the works last quarter, the Standard & Poor’s 500 Index and Dow Jones Industrial Average each hit record highs.   “There’s a lot of money sloshing around, and that’s driving the takeover activity,” said John Coumarianos,an analyst with Morningstar in Chicago. “Long-term mutual fund investors shouldn’t make too much of that because that’s not always going to be the case,” he said.   But for now, funds, including the $71 billion Fidelity Contrafund and the $26 billion T. Rowe Price  Equity Income Fund, are benefiting, increasing 6.2% and 5.9%, respectively. In the case of the Contrafund, the $29 billion pending buyout of credit-card payment processor First Data by Kohlberg Kravis Roberts played a major role, while The News Corp’s $5 billion bid for Dow Jones helped push the T. Rowe Price fund upwards.   But the quarter’s record goes to the Direxion Nasdaq-100 Bull 2.5X Fund, which gained 17%, beating its benchmark—the Nasdaq 100—which gained 7.8%.   “Market direction is everything for these funds,” said Direxion Chief Executive Ron Fernandes.   The Winslow Green Growth fund gained 15%, since a good portion of its $216 million in assets are held in online advertiser aQuantive, which Microsoft has snapped up for an 85% premium.   Energy funds also did well, due to rising oil costs, while real estate lagged, with office and apartment-oriented real estate investment trusts suffering, perhaps due to investors’ reaction to the unrelated sub-prime scares.   The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.