NEW YORK -- Mutual funds suffered along with the rest of the stock market during a troubled third quarter, with growth and technology sector funds posting the worst returns.
According to preliminary figures from fund tracker Lipper Inc., small-cap growth funds were the worst-performing domestic equity funds, posting a 7.2 percent negative return for the quarter, followed by mid-cap growth funds with a 5.9 percent negative return and large-cap growth funds with a 5.3 percent negative return.
Specialty diversified mutual funds -- funds that typically invest on a particular philosophy or theme that crosses sectors and market caps -- were the only broad-based US equity funds to post a positive return for the quarter, a small 1.2 percent. The next best fund group was equity income funds, which had a 0.2 percent negative return.
Overall, US diversified equity mutual funds posted a 3.6 percent negative return for the third quarter, which, as of yesterday, saw the Standard & Poor's 500 index lose 0.9 percent.
"This continues a trend we've seen all year, value outperforming growth, that reflects the kind of choppy, sideways market we've been in," said Michael Porter, senior research analyst with Lipper. "Growth has had a good run, but is more vulnerable in this type of market."
The more specialized sector funds posted an overall return of 2.1 percent for the quarter, buoyed by strong gains in real estate funds, natural resources and utility funds. Surging oil prices helped natural resources funds post a 6.8 percent return, while real estate funds had a 6.2 percent return and utility funds saw returns of 4.7 percent.
Technology-focused funds saw the worst losses as a string of semiconductor firms warned that their third-quarter earnings would be far less than expected.
Science and technology funds posted an 11.0 percent negative return for the quarter. Health and biotechnology funds saw negative returns of 4.5 percent, while telecommunications funds had a 2.1 percent negative return.
Some of the best performing mutual funds of the quarter were international funds, especially those focused on the developing world.
Latin American funds led all international funds with a 12.7 percent return, followed by general emerging markets funds with a 7.0 percent return.
Japanese equity funds were the worst performers with a 10.2 percent negative return as that country struggled with rising oil prices alongside the United States.