Third-Quarter Fund Roundup: The Big 10 Failed to Post Big Numbers

Looking at how the 10 biggest funds fared in the third quarter, it's clear the whales were swimming in the same water as the minnows.

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Most tech and tech-heavy growth funds cooled off in the third quarter, while financial stocks helped value funds ring up fatter returns. Predictably, that pattern played out among the 10 biggest funds, where more than $591 billion is invested, just as it did among smaller funds.

The good news is that in a quarter when the S&P 500 dropped 1.2%, seven of the 10 biggest funds managed to stay above water, according to Lipper. Of the 25 largest funds, however, a dozen lost ground.

10 Biggest Mutual Funds
Fund	Category	3Q Return	YTD Return
(VFINX)Vanguard 500 Index	S&P 500	0.1%	-1.4%
(FMAGX)Fidelity Magellan*	Large-Cap Core	-0.6	0.1
(AIVSX)Investment Co. of America	Large-Cap Value	0.5	3.0
(JANSX)Janus	Large-Cap Growth	0.7	3.8
(AWSHX)Washington Mutual Investors	Large-Cap Value	6.5	2.4
(FCNTX)Fidelity Contrafund*	Mid-Cap Growth	1.1	-0.3
(TWUIX)American Century Ultra Investor*	Large-Cap Core	0.2	-3.6
(JAWWX)Janus Worldwide*	Global	-5.7	-3.5
(FGRIX)Fidelity Growth & Income	Large-Cap Growth	1.3	2.1
(AGTHX)Growth Fund of America	International	1.9	18.3
Source: Lipper. Data through Sept. 29. *Closed to new investors.

Among the losers were the two biggest funds, the $110.5 billion(VFINX)Vanguard 500 Index (down 0.9%) and $109.8 billion (FMAGX)Fidelity Magellan (down 0.6%), but that was expected given each massive fund's significant correlation with the S&P 500. For comparison, each fund is more than 100 times bigger than the average U.S. stock fund, according to Morningstar.

Both funds beat more than 70% of their large-cap blend peers over the last three years, according to Morningstar.

Of the 10 biggest funds, the winner was the broker-sold $45.8 billion (AWSHX)Washington Mutual Investors, whose 23% financial-stock stake and modest 5% tech weighting helped the fund to a 6.5% gain in the third quarter. All three value funds, which tend to have significant holdings in the financial services sector, were above water, though the other two trailed Washington Mutual significantly. The broker-sold $57.7 billion (AIVSX)Investment Company of America gained 0.5%, while the (FGRIX)Fidelity Growth & Income fund gained 1.3%.

The only other value fund among the 25 biggest funds, (VWNFX)Vanguard Windsor II, rang up a 10.5% return in the quarter. The eye-catching return was probably due to the fund's nearly 40% stake in financial and utilities stocks and its modest 3.8% technology position.

On the flip side, the biggest losers in the third quarter were those funds that had big bets on the tech and/or telecom sectors, two of last year's darlings. The cellar-dweller among the 10 biggest funds was (JAWWX)Janus Worldwide. The fund, whose 3.4% loss since Jan. 1 beats its average global fund peer, had more than a third of its assets sunk into telecom stocks at the end of July, according to the Janus' Web site. With the average telecom fund down more than 7% in the third quarter, the fund's phone fetish probably put a healthy dollop of downward pressure on its returns.

Of course, there's a reason why the fund is the eighth-largest in the nation. Its 26.2% five-year annualized return beats 97% of its peers.

Among the 25 biggest funds, the (AEPGX)EuroPacific Growth fund, weighed down by big stakes in the sagging telecom sector and Asian markets, was hit hardest in the third quarter with an 8.5% tumble.

The fund's 11% loss since Jan. 1 is in line with its foreign-stock fund peers and its 15.4% 10-year annualized return beats 98% of its competitors.

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