Mutual-fund report: first quarter

April 18, 2010|By Jamie Smith Hopkins, The Baltimore Sun

A year and a half after the financial sector meltdown, those stocks are at the top of a rebound.

Finance was the best-performing mutual-fund sector in the first three months of the year, boosting funds that specialize in that area. Among them: Rydex-SGI's banking fund and T. Rowe Price's financial services fund, which both ranked in the top five of mutual funds that invest by sector and are managed in Maryland, according to Bloomberg News.

"The lows were so extreme that there's still a good deal of room to appreciate," said Jeff Arricale, portfolio manager of Price's Financial Services Fund, which had an 11.8 percent return in the first quarter.

Nationally, stock funds gained an average 4.4 percent during the first quarter — compared to a decline in the first quarter a year ago — extending a strong market rebound that began last year. Bond funds gained 1.5 percent, down slightly from a year earlier.

Market values are still below their peak in 2007, and some financial stocks might never climb all the way back, Arricale said. Their pre-meltdown performance was fueled by overleveraging and other risky decisions, and the pullback since then "means lower earnings," he said. But he thinks it also makes the sector a safer bet.

Arricale is particularly pleased with an investment in Aflac, the insurance firm. His team snapped up shares for an average of $21 in early to mid-2009 as investors were fleeing because they worried about the company's investments in hybrid securities from European banks. Last week, Aflac shares were trading above $50.

Besides finance, other high-performing areas included biotech, international markets and high-yield bonds. Most Maryland-based stock and bond funds posted gains in the first quarter.

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