Some funds made money for holders in 2002


An intriguing question is, "Which funds made the most money for their shareholders last year?"

Answering that question gives you a sense for the funds that actually made investors wealthier.

These are likely to be core funds that have attracted assets with good long-term performance and have kept shareholders around by giving them a relatively smooth ride.

I took a look at this statistic by individual share classes. This ranking tends to understate the impact of funds with multiple share classes, but combining them can lead to other distortions.

1. PIMCO Total Return Fund Institutional (PTTRX). Money made: $3.6 billion. This fund hit some rough spots when some airline and communications bonds got whacked. But one of the good things about running a huge bond fund is that you have to diversify into hundreds of names, and no one company is likely to burn you too badly. Thus, Bill Gross and his crew overcame those issues with some good sector moves to produce yet another year of outstanding returns.

2. Vanguard GNMA (VFIIX). Money made: $1.7 billion. Manager Paul Kaplan has ably guided this fund to strong returns in 2002 and over the long haul, too. He avoids exotic mortgage-backed securities in order to keep risk in check. Instead, he simply works to manage prepayment risk and interest-rate risk while letting the fund's low costs do the rest. Falling interest rates boosted returns a bit, but this fund's cost advantage will help its shareholders to make money year in and year out.

3. Vanguard Total Bond Market Index (VBMFX). Money made: $1.2 billion. Falling interest rates do wonders for this fund. Managers Ken Volpert and Ian MacKinnon invest a larger piece of the fund in corporates than does the Lehman Brothers Aggregate that the fund is supposed to track. Their reasoning is that corporates will boost returns, but this year they hurt as investors rushed to the safety of government bonds amid the WorldCom scandal.

4. Franklin California Tax-Free Income (FKTFX). Money made: $873 million. Oddly, this fund endured its worst year since 1995. The fund holds a little more lower-quality debt than most California funds and it has a little less interest-rate exposure (as measured by duration) than its peers. In short, it was on the wrong side of both trends last year. However, I'd be less concerned by a year like that - when its style was out of favor - than a year in which it underperforms because of poor execution.

5. Franklin U.S. Government Securities A (FKUSX). Money made: $611 million. As is Vanguard GNMA, this fund is a plain-vanilla GNMA offering. Manager Jack Lemein avoids interest-rate calls and instead buys Ginnie Maes and holds on. It's a nice basic fund for cautious investors.

6. Vanguard Total Bond Market Index Institutional (VBTIX). Money made: $557 million. See No. 3.

7. Vanguard Intermediate-Term Tax-Exempt (VWITX). Money made: $507 million. This fund has suffered through an off year, too. Managers Ian MacKinnon and Christopher Ryon were too cautious with their interest-rate positioning. In addition, they had a little exposure to the airline industry. Still, this fund has delivered the goods over the long haul. Its returns are in the top quartile for the trailing five- and 10-year periods.

8. Vanguard GNMA Admiral (VFIJX). Money made: $481 million. See No. 2.

9. Fidelity Intermediate Bond (FTHRX). Money made: $481 million. The story is similar at Fidelity's taxable-bond funds. No macro calls, just bond selection. This fund had the added advantage of having a longer duration than its peers, but it has also delivered excellent long-term returns.

10. Fidelity Spartan Municipal Income (FHIGX). Money made: $472 million. Fidelity has built one of the best muni shops around. It focuses exclusively on issue selection and lets its moderate expenses do the rest. Manager Christine Thompson has put up monster returns of 9.54 percent for the year and 5.98 percent annualized for the trailing five years, performances that place the fund in the top 5 percent of its category for both time periods.

Copyright © 2020, The Baltimore Sun, a Baltimore Sun Media Group publication | Place an Ad