The Quarterly Mutual Fund Update (QMFU) highlights the best- and worst-performing no-load mutual funds. It provides an overview of the types of mutual funds that are outperforming and those that are underperforming.

For many years, the QMFU existed as a stand-alone, premium newsletter. It will now be a recurring feature in the AAII Journal, available to all members and updated every three months.

Coronavirus Leads to a Rough Start for 2020

The first quarter of 2020 captured the transition into a bear market and a recession in a short period of time due to the coronavirus outbreak.

The only mutual funds in the QMFU universe with positive returns for the quarter were bond funds. The Northern U.S. Treasury Index (BTIAX) and the Columbia U.S. Treasury Index A (LUTAX) gained 8.4% and 8.0%, respectively, as the best and second-best performers for the first quarter.

For the best- and worst-performing domestic, international and sector funds, it was a question only of how small the losses were. The T. Rowe Price Communications and Technology Investor (PRMTX) sector fund was the top performer with a loss of 6.1%. The Fidelity Select Energy Service Portfolio (FSESX) was the worst performer with a 66.3% drop.

Sector Funds

The top five sector funds in the first quarter of 2020 each represented a different category. As mentioned, the top sector fund was T. Rowe Price Communications and Technology, down 6.1%. The health sector was the second-best category with the Fidelity Select Pharmaceuticals Portfolio (FPHAX) down 10.0%. Both of these funds highlight areas of the economy that are still in operation or have seen their business increase during the coronavirus pandemic.

In third place was the Fidelity Select Retailing (FSRPX) fund in the consumer cyclical category. The fund returned –17.7% for the quarter. The fund’s largest position is in Amazon.com Inc. (AMZN) at a portfolio weight of 24.98%, followed by Home Depot Inc. (HD) at 15.72%.

The Fidelity International Real Estate (FIREX) fund and the Fidelity Select Brokerage & Investment Management (FSLBX) fund rounded out the top sector funds, down 19.8% and 20.9%, respectively.

The sectors represented by the five lowest-performing sector funds for the quarter will come as no surprise given the coronavirus pandemic and the oil glut. Following the Fidelity energy service fund, mentioned above, the second-worst-performing sector fund was Fidelity Select Banking (FSRBX), which fell by 43.5% during the first quarter. The Fidelity Select Air Transportation Portfolio (FSAIX) was the third-worst, losing 42.4%.

Rounding out the bottom of the sector funds were the industrial fund Fidelity Select Defense & Aero Portfolio (FSDAX) and the consumer cyclical fund Fidelity Select Leisure (FDLSX), down 32.8% and 32.7%, respectively.

International Funds

The top international fund for the first quarter of 2020 was the Matthews Asia Innovators Investor (MATFX), which consists of all countries and developed and emerging markets in Asia. It lost 8.5%. Second-best for the quarter was the GQG Partners Global Quality Equity (GQRPX) fund, down by 13.4%. It was launched in 2019 and invests in large global companies. About two-thirds of its equity holdings are domestic companies.

Goldman Sachs GQG Partners International Opportunities (GSINX) fund was down by 13.7% for the quarter. The fund seeks large foreign growth stocks. It has similar international investments as the GQG Partners Quality Equity fund, but it differs in that it holds about 80% in foreign stocks.

Another fund focusing on the Asia-Pacific region was among the top five international funds for the quarter: T. Rowe Price Japan (PRJPX). It was down by 15.0%.

Matthews India Investor (MINDX) fund was the bottom-performing international fund during the first quarter of 2020, losing 32.5%. India instituted a nationwide lockdown in March.

Domestic Funds

Large-cap growth funds made up four of the five top domestic funds for the first quarter of 2020. The American Century Focused Dynamic Growth Investor (ACFOX) fund lost 6.8%, followed by GQG Partners U.S. Select Quality Equity Investor (GQEPX) fund, which was down by 10.1%. Large-cap funds suffered far less than small-cap funds during the onset of the coronavirus outbreak.

The mid-cap growth fund T. Rowe Price New Horizons (PRNHX) was the outlier of the top five domestic funds. It fell by 12.3% during the first quarter of 2020. It invests primarily in a diversified group of small, emerging growth companies.

The worst-performing domestic fund during the quarter was Schneider Small Cap Value (SCMVX), down 54.2%. It was followed by two additional small-cap value funds, LSV Small Cap Value Investor (LVAQX) down by 43.7% and Bridgeway Omni Tax-Managed Small Cap Value (BOTSX) down by 42.4%.