Mutual returns up slightly

NEW YORK — U.S. mutual funds posted minimal returns in the second quarter, tracking the stock market’s mediocre quarter overall, while international funds had negative returns as investors moved money into less risky holdings.

According to fund analysis company Lipper Inc., U.S. diversified equity funds had an average return of 0.84 percent in the second quarter. Small-cap value funds led the way with a 1.85 percent average return, followed by Standard & Poor’s 500 index funds with a 1.56 percent return. Large-cap funds of all kinds averaged about 1 percent returns.

Specialty funds had the poorest showing with a 2.19 percent negative return, while small-cap growth funds posted a 0.62 percent negative return, according to Lipper’s final mutual fund data for the quarter.

“You saw a lot of people move into large-cap and value funds in the quarter, outperforming small-caps and growth funds,” said Michael Porter, senior research analyst with Lipper. “One of the major themes was that the defensive investors fared relatively well compared to more aggressive and risk-tolerant investors.”

Specialty sector-based funds averaged a 0.86 negative return. Real estate funds were the worst performer, posting a 5.62 percent negative return, followed by financial services funds with a 2.68 percent negative return. Both sectors suffered as investors abandoned interest-rate sensitive stocks ahead of the Federal Reserve’s decision to raise interest rates Wednesday.

“That was pure risk aversion,” Porter said. “Interest rate sensitivity really hurt real estate and financials. That’s to be expected.”

Natural resources funds had the best returns with an average of 4.65 percent. Health and biotechnology sector funds averaged a 0.76 percent return.

International funds generally fared poorly with an average negative return of 2.41 percent. Gold-oriented funds fell off sharply with an 18.35 percent negative return.