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Monday, July 09, 2012

Equity Funds and Treasury Yields Are Down

News summary by MFWire's editors

The majority of equity funds failed to perform up to their index through Q2, report Barron's and The New York Times. The 7,951 U.S. diversified-stock funds fell 4.58 percent while S&P's 500 fell 2.75 percent for the quarter.

Stock-fund sectors that held up during Q2 were areas such as utilities, health care and real-estate funds.

Treasuries -- despite their recent falling -- low yields, were successful for the quarter as well. T. Rowe Price's PM Brian J. Brennan told The New York Times, "investors want income and safety."

The small yields Treasuries provide are risky because these yields are sometimes outpaced by the 2 percent inflation rate. When the inflation rate rises, the yield that Treasuries provide will hardly be enough to provide for the falling prices. Pimco Total Return Bond Fund, which is managed by Bill Gross, is keeping 35 percent of the portfolio invested in Treasuries as insurance. Gross told the Times that the "insurance has become more expensive now, but on a day you need that insurance you're glad to have it."

Other PMs, such as Dana Emery of the Dodge & Cox Income Fund and Kathleen Gaffney of the Loomis Sayles Bond fund, do not believe that Treasuries are worth the investment.

Other types of funds that performed well were municipal-bond funds with a 1.13 Percent second-quarter increase which boosted them by 6.62 percent for the first half of the year.  

Edited by: JY

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