Nineteen ninety-nine was the year mutual fund managers struck back.
After trailing market indexes and funds that passively track them through much of the late 1990s, managed mutual funds last year outperformed index funds by an average of 6.94 percentage points, according to preliminary data from Lipper Analytical Services Inc., which tracks mutual funds' performance.
That margin "was a noticeable positive and a changeover from previous years," said Edward Rosenbaum, research director at Lipper. And among those managed funds were a number that turned in figures double, triple or even quadruple the 20.22 percent returns racked up by funds tracking the Standard & Poor's 500-stock index.
"Active managers ought to be justifiably proud to have captured runaway performance in a couple of very specific sectors" of the economy, particularly technology, "which is notoriously difficult to manage," Rosenbaum added.
The Lipper data also show that:
* A super-strong fourth quarter provided the bulk of the year's performance. For example, large-company growth funds, which climbed 38.15 percent for the year, leapt 26.75 percent in the last three months. Likewise, small-company growth funds were up 62.99 percent for the year and 42.33 percent in the fourth quarter.
* Growth investors outperformed value investors by a wide margin. Value investing, the strategy of seeking out-of-favor stocks of solid companies, has suffered for several years. Unglamorous companies, profitable though they may be, have languished as highflying stocks have continued to fly even higher.
While large-company growth funds were posting that 38.15 percent return, large-company value funds posted a relative anemic 11.24 percent return. Small-company value funds were up only 6.39 percent, compared with 62.99 percent for small-company growth funds.
* Some sectors produced eye-popping returns. Science and technology funds soared 134.73 percent and Japan funds leaped 120.97 percent, while Pacific region funds were up 92.48 percent and international small-company funds rose 71.71 percent.
And those were averages. Some funds did even better. The Warburg Pincus Japan Small Companies Fund racked up a return of more than 328 percent for the year.
And Rosenbaum noted that the worst-performing technology fund was up 37.2 percent. "To be unhappy with that you would have to a special kind of greedy," he said.
* Small-company funds finally overtook those that invest in large companies, chalking up a 23.1 percent return compared with large-cap funds' 17.47 percent.
Lipper officials noted that the figures, while preliminary, should be close to the final numbers.
The funds' performances, Rosenbaum said, were driven primarily by initial public offerings and Internet company stocks, and it "strains credulity" to believe that investors will see a repeat of that.
In technology investing, Rosenbaum said, "the consensus is we are all in a car going 120 miles an hour toward the cliff. We know what will happen when we drive off the edge, but we don't know where the edge is." This "tends to generate kind of rewards you would expect for that kind of risk," he said.