By Jenne Mannion Technology and smaller companies-themed funds were among the weaker performers over...
By Jenne Mannion
Technology and smaller companies-themed funds were among the weaker performers over the second quarter of 2000, showing a reversal in fortune from the highs at the start of the year for both sectors.
Instead, biotechnology-themed funds led the way, according to the latest Lipper UK Unit Trust/ Oeic Quarterly survey.
The two best performing funds in the second quarter were biotech/healthcare portfolios, Framlington Health, which returned 30.49% over the period, and City Financial Bio Tech, which returned 21.69%.
Steve Lipper, global marketing director at Lipper, said: "The enthusiasm surrounding the early completion of mapping of the human genome was a major factor that buoyed these funds."
Managers also gained from low valuations in healthcare stocks in September/October 1999 and, although these stocks were seen as overvalued in March, the completion of the genome research helped push the sector to high levels at the end of the second quarter.
The property sector returned the best overall sector performance in the second quarter with 6.49% growth. This excludes the index Bear sector, which contains only one fund, the AIB Govett US Bear, which posted 12.41% growth. The property sector benefited in the quarter as manager looked for alternative investments to declining equities.
Global bond funds also delivered healthy performance on the back of weakening sterling against the dollar and euro. The global bond sector was the third best performing fund sector with 4.67% growth.
Volatile markets and the correction of technology, media and telecoms, led to a poor quarter for smaller companies funds. Japanese smaller companies were down 8.62%, UK Smaller Companies fell 8.07%, while European smaller companies dropped 6.16%, the three worst sectors in the survey.
However, this poor performance trend was not apparent among North American smaller companies, delivering returns of 4.82%. This gain was entirely due to the weakening of the pound against the US dollar. North American small company stocks actually declined by 4.05% in dollar terms over the same period.
The lack of confidence in UK stocks, fuelled by the tech reversal and concerns about future increases in interest rates, led to a difficult quarter for the FTSE 100 index, which dropped 3.05% over the quarter. This marked the first time since early 1994 that the index had fallen for two quarters in a row.
The UK equity income sector was the best performer among UK sectors with 2.79% growth, compared to the more aggressive UK smaller companies which trailed in last place with an 8.07% fall over the quarter.
In the UK All Companies sector, both active and index tracking funds declined in the second quarter. Active funds with a fall of 2.04%, outperformed their passive counterparts, with a larger fall of 2.49%, continuing a streak of six quarters of outperformance for the active funds.
UK Gilts funds and UK Other Bond funds posted returns with 1.75% and 0.74% respectively, both outperforming large cap UK equity funds.
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