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P&I SURVEY: Fixed-income managers shine while equities get hammered; Last-quarter rally can''t stop bleeding for beleaguered stock funds.

Article Excerpt
Byline: Dave Kovaleski

The equity market rebounded nicely in the fourth quarter but it was too little too late for stock managers in the Pensions & Investments survey of mutual funds most used in defined contribution plans.

In 2002, every equity fund in the P&I universe finished the year in negative territory.

On the other hand, it was a great year for fixed-income managers, who saw their funds post better returns than in 2001.

The negative equity returns reflect a market that was badly beaten in 2002. Despite a more than 8% gain in the fourth quarter, the Russell 1000 index finished the year at -21% while the Standard & Poor's 500 closed the year at -22%.

It's the third straight down year for the benchmarks, marking the first time since the 1930s that the market has dropped in three consecutive years. ``This has been one of the worst periods in history,'' said Bridget Hughes, fund analyst at Morningstar Inc., Chicago, and it might not be over yet. The fourth-quarter rebound was a ``low-quality rally,'' she said, adding she doesn't expect to see the market turn until capital spending increases. ``I don't know that anyone has seen that yet,'' said Ms. Hughes.

Bears attack value

Equity managers that had the most success in 2002 found it in the value equity universe, but even value funds got hurt last year. ``It was the...