Jeff Tjornehoj on "Business for Breakfast" 1060 KRCN Tuesday, July 31, 2006 - July Mutual Fund Performance

A: Very true. Except for a few pockets of recovery or safety, most equityfunds ended down. What I found unusual was that the winners in July weren'tnecessarily in very specific corners of the market: although 100% of LatinAmerican Funds and Utility Funds were up, so too were S&P 500 IndexObjective Funds and International Large-Cap Value Funds. So, there was someamount of broad-based bullishness--it just happened to be rather small.

Q: Were those categories also the top performers?

A: Yes. There was nothing unusual about that. Utility Funds took top honorswith a gain of 4.3%, followed by Latin American Funds at 3.8% and RealEstate Funds at 3.2%. Although 99% of RE funds ended in the black, a fewshare classes ended slightly down, and one fund (the Alpine US Real EstateFund) lost about 5%. That fund emphasizes homebuilders much more than otherRE funds, and that's worked against it so far this year.

Q: Interesting mix there. Safe choices like utilities and REITs on one sideand Latin American on the other?

A: I think by and large investors sought safety. Large-Cap Value Funds alsohad a great batting average to go with decent performance--up 1.9%--andthat's often indicative of a conservative bias. Latin American and EmergingMarkets were both good performers when all was said and done, and that Ithink was due to investors' buying on the dip. These funds suffered lossesof 10%-13% on average in May. That spooked many people. But Latin AmericanFunds gained another 3.5% in June, and the category was up slightly more inJuly. That's a good path to recovery, but I still get the sense some ofthese investors have their finger on the sell trigger. The ones burned afew months ago aren't convinced this latest bounce in emerging markets isanything but transitory.

Q: So, those were the good performers. Which ones did some people wish theyhadn't been in?

A: Small-caps at home and abroad had a tough month. Small-Cap Growth hasbeen especially hard-hit lately. Three months ago the category was doingbetter than core and value, and now it lags them quite a bit. SCGE was downnearly 6% in July, worse than any sector funds category, including tech,which was down 5.5%. I think there's a lot of worry out there about risingrates affecting smaller companies' borrowing capacities as well as theprospect of a slowing economy.

Among techs, there's been an awful lot of carnage lately. Mostly, we'reseeing Internet-related funds turning in the worst numbers, and they'vebeen only slightly worse than networking-related. Funds heavily invested inthese industries--in addition to transportation--were much worse off.

Q: We've watched Japan's Nikkei index take a few tumbles--I'd assumeJapanese Funds also had a rough month?

A: Very true. The group was down nearly 3% in July and has been down forthe past three months. The dollar ended the month where it sat for much ofthe beginning, so returns didn't get a good weakening-dollar boost. Theprospect of weakening global demand has weighed on Japanese stocks, and thelatest numbers tended to agree with that view.

Q: And bonds?

A: A good month, but the sentiment was quite different than equities': inthis case the more-risky types outperformed. People still want their yieldand appear willing to go to great lengths to get it.

Q: Thanks again, Jeff.

A: You bet--thanks for having me.

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