(Bloomberg News) Fidelity Investments' largest mutual fund that invests in small-company stocks was the biggest loser in the U.S. as the past week's market plunge wiped out about $2 trillion in global equity value.
As world markets sold off on concern that the U.S. economy may be sliding back into recession, the $3.8 billion Fidelity Small Cap Stock Fund fell 11 percent from July 25 to Aug. 2, the most of 1,131 domestic stock funds with assets of at least $500 million, according to data compiled by Bloomberg. The $3.1 billion Aston/Fairpointe Mid Cap Fund and the $2 billion Ariel Fund were the next-worst performers, losing 10.4 percent.
The political tussle over the U.S. debt ceiling combined with lower-than-expected factory orders, declining consumer confidence and weaker household spending triggered a 6.8 percent slide in the Standard & Poor's 500 Index over seven sessions before part of the U.S. benchmark's loss was recouped yesterday with a 0.5 percent gain. All 10 of the worst-performing funds in the selloff specialize in small or mid-sized stocks.
"A lot of the sentiment that has soured on small caps has been driven by softening economic expectations," Jeff Tjornehoj, an analyst with Denver-based research firm Lipper, said in an interview. "Small-caps tend to do best when economies are accelerating."
The S&P 500 briefly erased its 2011 gain, while the Dow Jones Industrial Average lost ground for eight straight sessions. The Russell 2000 Index of smaller U.S. companies, with a weighted average market capitalization of $1.2 billion, sank 8.9 percent over seven losing trading days.
'Strong Track Record'
"We encourage investors to take a long-term approach to investing and not to put undue focus on short-term results," Adam Banker, a spokesman for Fidelity, said in an e-mailed statement. Manager Andrew Sassine "has a very strong track record" since taking over on July 1, 2008, and the fund has beaten its benchmark over three, five and 10 years, Banker said.
Ariel's John W. Rogers and Fairpointe's Thyra Zerhusen weren't available for comment, according to spokesmen for the two firms.
Over the past decade, small-company stocks have outperformed large stocks, Lipper's Tjornehoj said. The average annualized return for U.S. small-cap stock mutual funds in the 10 years through through July was 7.1 percent, compared with 2.4 percent for large-cap funds, he said, citing Lipper data.
U.S. stocks slumped for the third straight month in July as Congress debated a debt agreement and credit raters warned of possible government downgrades. The top-performing mutual funds were those that invest in gold and precious metals, including the $620 million Gamco Gold Fund, which advanced 9.4 percent in the past month as the price of the metal rallied to records. The $1.4 billion Federated Prudent Bear Fund, which bets on a stock- market decline, climbed 8.2 percent.