Gold, international funds are hot

January 07, 1994|By Andrew Leckey | Andrew Leckey,Tribune Media Services

Glitter and faraway places captured the hearts of American mutual fund investors in 1993.

Folks concerned about the domestic stock market were blessed with dramatic returns in gold-mining and international funds.

Gold funds zoomed an amazing 80.87 percent, while international funds turned in a 39.40 percent gain. The average equity fund was up 18.81 percent for the year, according to the Lipper Analytical Services fund-tracking firm.

Just one problem: Don't expect such good fortune to last indefinitely.

"Gold and international funds did so well that their gains just don't seem sustainable," cautioned A. Michael Lipper, president of Lipper Analytical. "Gold is always a volatile precious metal and international funds are playing catch-up after being down for four years."

Gold was boosted by revivals in the metal itself, the South African rand and the mining companies, he noted. Meanwhile, the recent hit that the Mexican stock exchange took following an uprising in the state of Chiapas points out how foreign events can take unexpected turns.

Most experts agree gold should never make up more than 10 percent or 15 percent of an individual's portfolio. It has good and bad years.

"Our fund is 100 percent South African gold-mining shares, which were badly beaten down and now recovering," said Caesar Bryan, portfolio manager of Lexington Strategic Investments, up 269.78 percent to lead the pack. "I expect the price of gold, now less than $400 an ounce, to go beyond $500, since supply is down and there's increased demand."

Lexington Strategic Investments' shares of mining company Western Areas rose from 49 cents a share to more than $8.50 a share, an increase of better than 1,600 percent.

"1993 was clearly a comeback year for gold after a very bad 1992," added Victor Flores, manager of United Services Gold Shares, up 123.92 percent. "I expect gold to keep increasing in $25-an-ounce increments to $450, although activity in commodity and hedge funds will determine how it actually performs."

Top-performing stock funds for 1993 with minimum initial investment requirements of $2,500 or less, according to Lipper, were:

* Lexington Strategic Investments, Saddlebrook, N.J.; $85 million in assets; 5.75 percent "load" (initial sales charge); $1,000 minimum initial investment; up 269.78 percent.

* United Services Gold Shares, San Antonio, Texas; $338 million in assets; no load; $1,000 minimum; up 123.92 percent.

* Van Eck International Investors, New York; $704 million in assets; 5.75 percent load; $1,000 minimum; up 113.41 percent.

* Fidelity Select Precious Metals and Minerals, Boston; $498 million in assets; 3 percent load; $2,500 minimum; up 111.64 percent.

* Keystone Custodian Precious Metals, Boston; $224 million in assets; 4 percent back-end load which reduces over four years; $1,000 minimum; up 101.89 percent.

International funds, especially those emphasizing developing countries, excelled in the fourth quarter. They make sense as a diversification move,but one should have realistic expectations.

"When you see the 38 percent gain of the Hong Kong stock market, or 19 percent in Thailand and 15 percent in Malaysia, potential is obvious," said Allan Liu, Hong Kong-based portfolio manager of Fidelity Southeast Asia Fund, up 47.08 percent in the quarter.

Portfolio holding Hong Kong Telecommunications Ltd., gained 28 percent based on potential for developing its telephone business in China.

"North America discovered Asian investment with a vengeance, and a lot of American money is coming into the markets here," said Ean Wah Chin, who runs the two Morgan Stanley Asian Growth funds, as well as an institutional fund.

Best performers in the fourth quarter for average investors were:

* Fidelity Southeast Asia Fund, Boston; $1.14 billion; no load; $2,500 minimum; up 47.08 percent.

* Morgan Stanley Asian Growth "A," New York; $130 million in assets; 4.75 percent load; $1,000 minimum, up 43.71 percent.

* Morgan Stanley Asian Growth Fund "B," New York; $104 million in assets; 1 percent back-end load for first year; $1,000 minimum; up 43.57 percent.

* Wright Hong Kong Fund, Bridgeport, Conn.; $17 million in assets; no load; $1,000 minimum; up 41.38 percent.

* Merrill Lynch Dragon Fund "A," New York; $924 million in assets ("A" and "B" funds combined); 4 percent load; $1,000 minimum; up 40.93 percent.

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