View Fund Performance
Market Environment
U.S. equities again were in positive territory during August, buoyed by increasing signs of economic stabilization and recovery, better-than-expected corporate earnings reports and higher levels of global business and consumer confidence. Large-cap benchmark indices such as the S&P 500 Index and the Russell 1000 Index rose 3.61% and 3.63%, respectively. The S&P 500 Index recorded its sixth consecutive monthly advance and concluded the month 51% above its March 9 low. Stock market gains appeared muted to some extent by concerns that the magnitude of the rally could have outstripped the overall timing and pace of economic improvement. Another significant fly in the ointment that tempered market gains was the performance of the Chinese equity market, which plunged 22% amid concerns that government tightening of lending could undermine the country’s robust economic growth trajectory.
Although it was difficult to discern any trends in the markets, overall U.S. equities took heart in a variety of encouraging macroeconomic data points, which, in the aggregate, indicated the economy had either bottomed or started to improve, resulting in many economists forecasting positive GDP growth kicking in relatively soon. Although the sustainability of the economic turnaround continued to be a source of debate (as evidenced by still-depressed readings of U.S. consumer confidence and absence of small business job creation) and numerous structural challenges to the economy remained (including a still-deleveraging consumer, federal and state budget deficits and commercial real estate woes), on balance the data suggested a promising outline for a secular recovery could be starting to take shape. In particular:
- Many leading economic indicators for the United States turned upward, highlighted by better manufacturing-related readings such as industrial production, claims for unemployment benefits and housing permits. Global short rates, which tend to lead GDP, continued to decline.
- Global trade increased.
- A number of housing-related metrics had a less negative tone. These included reduced inventory levels, record-level affordability on the back of low mortgage rates, stabilizing prices (higher in some regions), greater sales activity for existing homes and higher levels of new housing starts.
- Employment declines moderated.
- Nearly one year after the bankruptcy of Lehman Brothers Holdings and subsequent seizure of the credit markets, credit and liquidity spreads continued to improve. Corporate bond issuance reached a record high. Merger and acquisition activity continued to be brisk.
- Investor interest in owning “risk” assets increased. The massive amount of cash (in the form of money market mutual funds and other short-term instruments) nearly $4 trillion at its peak earlier in the year, started to be worked down and redeployed into other types of investments.
- The automobile industry revived somewhat. Vehicle production ramped up substantially in the aftermath of Chrysler and GM’s emergences from bankruptcy. Automobile sales rose sharply, sparked by the government’s Cash for Clunkers program, which successfully generated significant levels of activity. Vehicle inventory levels declined substantially (pointing to higher demand and the need to restock) and prices rose for used cars.
- The U.S. government stimulus program remained in its fledgling stage, with its total effect yet to be fully unleashed on the economy. Of the total approved stimulus amount of nearly $800 billion, only about 11% had actually been allocated and an even smaller percentage had been put to work as of the end of the month.
- A number of emerging market economies appeared to improve, an important milestone from the perspective of improved global growth prospects.
- Inflation remained quiescent.
In addition, while many companies’ top-line revenues were under pressure during the most recently completed reporting quarter, there were relatively few major earnings misses as a result of cost structure decisions undertaken earlier in the year. Perhaps more importantly, generally speaking there was better news from companies in terms of their sales outlooks, inventory replenishment potential, confidence in their cost structures and rehiring plans.
Commodity prices were flat in August, as investors fluctuated between having conviction in a more sanguine global growth outlook and questioning the durability of China’s economic recovery and impact of monetary policy tightening. Reflecting this stalemate, the Reuters/Jefferies CRB Index (a basket of commodities comprised of 19 energy, metal and agricultural prices) was essentially unchanged during the month. Crude oil finished the month trading at about $70 a barrel, a mild increase as compared to July monthend. In sharp contrast, natural gas continued its descent, finishing the month trading at about $3.
Equities (using the S&P 500 Index as a point of reference) overall were not as strong compared with July, but displayed some resilience nonetheless. Nine out of 10 GICS economic sectors achieved positive returns led by financials which decisively outperformed the rest of the market. Telecommunication services slipped 2% and was the lone sector to be in the red.
Product Performance
For August 2009, Columbia Marsico Growth Fund underperformed its primary benchmark, the S&P 500 Index, which had a 3.61% return.
Sector Performance
At an industry level, performance was also quite solid. Seventeen (out of 20) GICS industry groups gained. The best-performing areas featured a panoply of financial services-related groups. The three most prolific industry-level laggards were automobiles and components (-4%), household and personal products (-1%) and food beverage and tobacco (-0.2%).
In terms of equity market characteristics, everything (small/medium/large; growth/value/core) was up in August; it was just a matter of degree. All 26 U.S. equity indices maintained by Russell Investments had positive returns, advancing by a low-to-high range of 0.98% (Russell 2000 Growth Index) to 6.61% (Russell Midcap Value Index). Large-cap companies modestly outpaced their small-cap counterparts by 0.76% based on Russell 1000 Index and Russell 2000 Index performance. Across the entire equity market spectrum, value enjoyed an edge over growth, boosted by the resurgent financials sector. In the large-cap realm, the Russell 1000 Value Index and Russell 1000 Growth Index posted total monthly returns of 5.23% and 2.07%, respectively. (Year-to-date through August 31, growth still led value by 11.35%, bolstered by consistently strong technology company stock prices.)
Performance data quoted represents past performance, and current performance may be lower or higher. Past performance is no guarantee of future results.
Please read and consider the investment objectives, risks, charges and expenses for any fund carefully before investing. For a prospectus, which contains this and other important information about the fund, contact your Columbia Management representative or financial advisor or go to www.columbiamanagement.com.
The Standard & Poor’s (S&P) 500 Index is an unmanaged index that tracks the performance of 500 widely held, large-capitalization U.S. stocks.
The Russell 1000 Index is an unmanaged index that tracks the performance of 1,000 of the largest U.S. companies based on market capitalization.
The Reuters/Jefferies-CRB Index is designed to provide timely and accurate representation of a long-only, broadly diversified investment in commodities through a transparent and disciplined calculation methodology
The Russell 2000 Growth Index measures the performance of the small-cap growth segment of the U.S. equity universe. It includes those Russell 2000 companies with higher price-to-book ratios and higher forecasted growth values.
The Russell Midcap Value Index measures the performance of the mid-cap value segment of the U.S. equity universe. It includes those Russell Midcap Index companies with lower price-to-book ratios and lower forecasted growth values.
The Russell 2000 Index measures the performance of the 2,000 smallest companies in the Russell 3000 Index, which represents approximately 8% of the total market capitalization of the Russell 3000 Index.
The Russell 1000 Growth Index is an unmanaged index that measures the performance of those Russell 1000 Index companies with higher price-to-book ratios and higher forecasted growth values.
The Russell 1000 Value Index measures the performance of those Russell 1000 Index companies with lower price-to-book ratios and lower forecasted growth values.
Unlike mutual funds, indices are not managed and do not incur fees or expenses. It is not possible to invest directly in an index.
Since economic and market conditions change frequently, there can be no assurance that the trends described here will continue or that the forecasts will come to pass. The views and opinions expressed are those of the portfolio managers and analysts of the affiliated advisors of Columbia Management Group, are subject to change without notice at any time, may not come to pass and may differ from views expressed by other Columbia Management associates or other divisions of Bank of America. These materials are provided for informational purposes only and should not be used or construed as a recommendation of any security or sector.
There is no assurance that any securities discussed herein will remain in an account’s portfolio at the time you receive this report or that securities sold have not been repurchased. It should not be assumed that any securities transactions or holdings discussed were or will prove to be profitable, or that the investment recommendations or decisions made in the future will be profitable or will equal the investment performance of the securities discussed herein.
All results shown assume reinvestment of distributions and do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.
Columbia Management Group, LLC (“Columbia Management”) is the investment management division of Bank of America Corporation. Columbia Management entities furnish investment management services and products for institutional and individual investors. Columbia Funds are distributed by Columbia Management Distributors, Inc., member FINRA and SIPC. Columbia Management Distributors, Inc. is part of Columbia Management and an affiliate of Bank of America Corporation.
Columbia Management Advisors, LLC (“CMA”) has retained Marsico Capital Management, LLC (“MCM”) to serve as investment subadviser to the Columbia Marsico Growth Fund. As the investment subadviser, MCM makes the investment decisions and manages all or a portion of the fund. MCM is an investment adviser registered with the Securities and Exchange Commission. MCM is not affiliated with Bank of America. |