Mutual Funds Ride Revival in Commodities
Mutual funds that focus on commodity-related companies have surged in 1999 as energy and metals prices have rebounded, reversing last year’s losses.
What’s more, some money managers say the commodity funds still have room to rise, benefiting from recoveries in Asian economies and cost-cutting by producers. That could attract investors who have long shunned these funds.
Among the 46 natural resource funds tracked by Bloomberg Fund Performance, their average return so far this year is about 36%, topping even the performance of highflying technology funds, which have returned about 35%.
The average general stock fund, meanwhile, is up 8% to 10%.
The commodity-fund sector’s top performer has been the Fidelity Select Energy Service Portfolio, which has returned more than 71%.
But that is in large part just a rebound from last year’s dive, when the fund sank nearly 50% as crude oil prices plunged and dragged energy stocks down as well.
Among other big gainers, Robertson Stephens Global Natural Resources Fund has jumped more than 43%. But after losing 34.5% last year, the fund’s surge this year doesn’t have investors beating down the doors. The fund hasn’t attracted net new money in 1999, a spokeswoman said.
It might take more than six months of gains to get more investors interested, after a decade of disappointment for these funds. The granddaddies of the sector, such as the T. Rowe Price New Era Fund, founded in 1969, have lagged the blue-chip Standard & Poor’s 500 index seven of the last 10 years.
The T. Rowe Price fund’s manager, Charles Ober, traces the commodity sector’s troubles to a sequence of events in the 1990s that left many commodities in oversupply, crushing prices.
These included the breakup of the Soviet Union, which opened new oil and mineral deposits to production, and the collapse of Asian economies, which depressed demand.
This year’s revival has been triggered by the 80% surge in oil prices. Now, fund gains could be extended by investments in companies profiting from recovering economies in Asia and continued limits on growth of production of such resources as oil, copper and other commodities.
“There’s positive economic news out of much of the world,” said Borden Putnam, an analyst for the Robertson Stephens fund.
Investors hunting for a commodity fund should pay close attention to what’s in the portfolio. Commodity bets can range among firms in such businesses as energy, metals, lumber, paper, chemicals and others.
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Hot Commodities
Mutual funds investing in commodity stocks have been among this year’s best performers. But performance can vary greatly depending on what commodity groups the managers are betting on, among other factors. A look at how a sampling of commodity-oriented funds have fared last year and so far in 1999:
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Assets Total return: Total return: Fund (millions) 1998 YTD* Fidelity Sel Energy Svcs $740.5 -49.7 +71.6% Rydex Energy Services Inv. 35.6 NA +58.3 Invesco Energy 178.5 -27.8 +52.5 RS Global Natural Res 31.3 -34.5 +43.3 Excelsior Eng & Nat Res 54.4 -15.9 +34.8 Vanguard Energy 1,110.7 -20.5 +32.3 MSDW Natural Res B 190.7 -21.8 +30.4 Putnam Glob Nat Res B 143.1 -14.1 +29.5 T. Rowe Price New Era 1,129.3 -9.9 +25.0 AIM Global Resources B 22.4 -34.7 +19.5 Icon Basic Materials 27.3 -10.6 +16.4 S&P; 500 index +28.6 +10.9
800 Fund number Fidelity Sel Energy Svcs 544-8888 Rydex Energy Services Inv. 820-0888 Invesco Energy 525-8085 RS Global Natural Res 766-3863 Excelsior Eng & Nat Res 446-1012 Vanguard Energy 662-7447 MSDW Natural Res B 869-6397 Putnam Glob Nat Res B 225-1581 T. Rowe Price New Era 638-5660 AIM Global Resources B 347-4246 Icon Basic Materials 764-0442 S&P; 500 index
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*Note: Year to date total return figures through Tuesday
NA= Not available
Sources: Lipper, Bloomberg News
