Although seven of 10 Colorado-based mutual funds have outperformed their peers during the last three years, investors continue to redirect their money elsewhere, according to Lipper Inc., a Denver-based mutual- fund research firm.
For the three-year period ended Sept. 1, 74 of 115 mutual funds in Colorado beat their peers nationally, Lipper found. Over almost the same time, mutual funds in the state suffered a net outflow of $38 billion in assets.
In fact, investors pulled out more money than they put into Colorado mutual funds during 33 of the last 35 months, even as those funds began outpacing their peers.
“A lot of the outflow has to do with the market-timing scandal,” said Don Cassidy, a senior researcher at Lipper.
The scandal enveloped Janus Capital Group and the now-defunct Invesco Fund Group, which, among other U.S. fund companies, allowed hedge funds and other large investors to make rapid trades in certain funds at the expense of smaller investors.
Both groups, hit hard during the bear market, watched investors withdraw billions of dollars as a result.
“While there is still outflow, it is improving,” said Shelley Peterson, a Janus spokeswoman. “It’s impossible to predict when it will happen, but we are confident the flow picture will change.”
Investors who bought into Colorado’s more popular growth mutual funds as they were peaking in the late 1990s may be finally pulling the plug after recouping their losses.
“There is the get-out-and- get-even mentality,” Cassidy said.
Meanwhile, Westcore Flexible Income, Colorado’s top-performing mutual fund when compared with its peers, saw investors pour money into its portfolio, said Mark McKissick, one of the fund’s managers.
The $180 million fund, up from $7.3 million three years ago, outperformed its peers by 9.4 percent. The fund increased 12.6 percent annually, mostly on returns from bonds for commercial real- estate investment trusts, energy and utility companies.
“We manage with a long-term focus – with investments, not trades,” McKissick said.
At Janus, the Contrarian and High Yield funds outpaced their peers by 9.3 percent and 7.0 percent, respectively, with the Contrarian returning 24.6 percent per year.
The Icon Energy fund produced a 40.6 percent annual gain, the best of any Colorado mutual fund. It outpaced its peers by just 4.5 percent, however, good for eighth-best in the state.
David Decker, the Contrarian fund manager, said success in steel, cement and infrastructure-related companies in India fueled many of his fund’s gains. An early position in Apple Computer Inc. also proved wise.
“I’m looking for companies that are beaten up or misunderstood,” Decker said, explaining the fund’s strategy.
In the near term, Decker is shifting assets to international companies, especially those related to the quickly developing global infrastructure.
“That’s an area I gravitate toward,” Decker said.
Staff writer Will Shanley can be reached at 303-820-1260 or wshanley@denverpost.com.
