1999's Top Funds Have Unforgettable -- and Probably Unrepeatable -- Year

This year's list of top-10 funds is like a millennium-ending fireworks display: It's awesome to behold, but if you get too close, you could get burned.

Led by (NGTIX)Nicholas-Applegate Global Technology, an institutional fund that has returned nearly 500%, the year's best funds are the product of a robust recovery in Japan and a technology-stock frenzy in the U.S.

While these sectors may well continue to surge in 2000, the funds will be hard pressed to keep pace. Most racked up incredible returns by beginning with a small asset base -- seven of the 10 have less than $500 million in assets -- and concentrating their investments in a single runaway sector.

The top-10 list "is not how you pick funds for next year," says Ed Rosenbaum, research director at fund-tracker Lipper. "If I were a betting man, I'd bet against these funds duplicating their performances next year."

Best of '99
Fund	Assets ($ mil.)	YTD return
1. (NGTIX)Nicholas-Applegate Global Technology	129	485%
2. (WPJPX)Warburg Pincus Japan Small Company	1,090	328
3. (MSCGX)MAS Small Cap Growth Institutional	196	307
4. (VWEGX)Van Wagoner Emerging Growth	1,336	281
5. (NEVIX)Nevis Fund	78	278
6. (MFITX)Monument Internet	89	272
7. (WPJGX)Warburg Pincus Japan Growth	689	265
8. Driehaus:Asia Pacific Growth	22.9	264
9. MFS Vertex Contrarian	7.4	254
10. (ATCHX)Amerindo Technology	407	246
Data as of Dec. 30. Source: Lipper.

The list does not include results from Dec. 31. But Friday's half-day session of light trading isn't expected to alter the results significantly.

TSC profiled most of the top-10 funds in a Dec. 2 story. MFS Vertex Contrarian, which only recently moved into the top 10, was profiled separately in a Sept. 16 story.

The size of top funds' returns are extraordinary by any measure. The Nicholas-Applegate fund's one-year, 485% return nearly doubles the S&P 500 index's 249% five-year return. Last year's No. 1 fund, the (WWWFX)Internet fund, returned 196% in 1998. That performance wouldn't even rank in the top 20 this year. In fact, 21 funds returned 200% or more. And more than 100 had 100% or better returns as of midweek. (See the TSC Century Club list of domestic funds with triple-digit returns.)

In many other ways, the top-10 list is not a mainstream group of funds. No. 1 Nicholas-Applegate Global Technology has a $250,000 required minimum investment that is beyond the reach of many investors. (But just for fun, here's something to salivate over: A $10,000 investment at the fund's July 31, 1998, inception would be worth more than $90,000 today, according to Morningstar.)

No. 10 Amerindo Technology has been known to make enormous bets on a single stock. Yahoo! (YHOO), for example, accounted for as much as 43% of the fund's portfolio as of Dec. 31, 1998.

No. 9 MFS Vertex Contrarian is an experimental hedgelike fund that is not available to the general public. Boston-based MFS says there are no immediate plans to launch the $7 million fund, and this year's outsized performance only complicates the decision.

"To bring a fund like that public with that type of performance is a negative because we don't want to put across the idea to investors that they could potentially match that type of return," says MFS spokesman David Oliveri.

Another Vertex fund with a similar investment style, All-Cap, was shut down on Nov. 24, Oliveri says, though it's still included in the Lipper rankings. Its 190% return places it among the top 25 funds of the year.

The incredible returns of the top 100 or so funds this year have skewed investors' perceptions. The average diversified equity fund returned 26% this year. But nearly half of diversified funds failed to beat the S&P 500 index, which returned 20.7% through Thursday.

While science and technology funds returned an average of 132% and telecommunications funds returned 71.7%, on average, financial services and real estate funds were in the red. Equity-income funds returned just 2.7% on average. And value fund returns were paltry by comparison, ranging from 4.6% for the small-cap variety to 10.8% for large-cap value funds.

"There's no question that when people finally look at their year-end statements they're going to see 15% and 18% returns and think they got robbed, and in fact, that's simply not the case," says Lipper's Rosenbaum.

"Comparing your portfolio to the highest-flying funds is like considering yourself a failure if you can't run a four-minute mile," he says. "It's a stupid way to run your life in investing."

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