Before letting last year's performance recede into the past, let's take a look at 1998's most disappointing funds -- funds with good pedigrees that fell on their faces.
Shares in the American 20th Century Giftrust mutual fund must be gifts to another person and can't be redeemed for at least 10 years. Some investors may be feeling trapped just now. The firm shook up the manager team in January 1997 in a failed effort to boost returns.Giftrust, which buys stocks of companies with accelerating earnings, was off 13.1 percent in 1998 -- its third consecutive year of rear-of-the-pack results.
"Giftrust's returns will improve," vows Robert Puff Jr., the company's chief investment officer. "We just don't know when."
A set of private accounts run by investment wonk Barr Rosenberg returned an annualized 13.4 percent in the five years through 1997 -- with low volatility and no relationship to whether the stock market went up or down. Using a computer-driven system, Rosenberg bought promising stocks and sold short those with poor prospects. (Selling short is a way of betting a stock will decline.)
So Barr Rosenberg Market Neutral was rolled out last year to much fanfare and flopped -- off 1.1 percent.
"We would have loved to have a great first year," says co-manager Will Jump.
Brandywine is a cautionary tale of the perils of jumping in and out of stocks. In autumn 1997, lead manager Foster Friess dumped U.S. stocks he feared would be hurt by fallout from Asia. Going into 1998, Brandywine was 54 percent in cash. That figure briefly rose to 78 percent, and the fund remained 44 percent uninvested in stocks at the end of March. During those three months, the S&P 500 gained 14 percent.
Friess reinvested his hoard just in time to be hammered by last summer's market collapse. As a result, Brandywine lost 0.7 percent in 1998.
When Cohen & Steers Realty Shares opened a smaller, more aggressive real estate fund focused on its best ideas, it seemed a good idea. But Cohen & Steers Special Equity had by far the worst record among real estate funds in 1998, a 33.8 percent loss.
Normally a consistent, low-risk winner, Greenspring became a high-risk loser.
"For the first time in our history, we have lagged the comparable averages during a market decline," says Charles Carlson, who has managed the fund since inception in 1987.
Greenspring lost 16 percent last year.