Global energy funds down in May; brace for summer

NEW YORK Fri Jun 10, 2011 8:19am EDT

Traders work in the crude oil and natural gas options pit on the floor of the New York Mercantile Exchange in New York, April 25, 2011. REUTERS/Shannon Stapleton

Traders work in the crude oil and natural gas options pit on the floor of the New York Mercantile Exchange in New York, April 25, 2011.

Credit: Reuters/Shannon Stapleton

NEW YORK (Reuters) - Global energy funds fell last month as oil prices slumped, Lipper data showed on Friday, signaling more losses if commodities extend their sell-off in the summer as some market forecasters expect.

"I think investors have been taking their foot off the gas pedal," said Tom Roseen, head of research services at Lipper, a Thomson Reuters company that gathers data and analysis on mutual funds.

"We've had some real concerns lately, beginning with the Japanese tsunamis and earthquakes, going on to the transportation issues caused by flooding and tornadoes in the United States. People have been playing the energy sector less, wondering what's going to happen to profitability there."

Dozens of global decision-makers will gather at the Reuters Global Energy and Climate Summit next week to discuss the challenges facing the 21st century.

A Lipper survey of some 120 energy-focused equity funds with varying exposure to the U.S. and world markets showed many up by double digits for the year and over the last 12 months.

But when seen just over the last three months -- particularly in May, when oil prices plunged -- almost every one the funds was in the negative.

"Most of them got bid up quite heavily at the start of the year, so year-to-date you've really high returns, of 10 to 12 percent in some cases," Roseen said.

"Of course with the volatility in oil lately, some of the oil-centric players have taken a beating. But you'd think the alternative energy guys would have done well but the data shows no, as they were going through issues of their own like how to package, sell and achieve economies of scale in green energy."

U.S. crude oil fell about 10 percent in May -- its biggest drop in nearly a year -- after a rout early in the month sparked by weak U.S. and European economic data was offset only partially toward the close by bullish demand statistics.

Commodity markets as a whole, as measured in the Reuters-Jefferies CRB index .CRB, fell 5.5 percent last month -- their most in a year.

In May, funds under Lipper's Global Natural Resource class -- which usually have about three-quarters of their assets in non-U.S. markets -- averaged the biggest decline of 4.5 percent.

There are nearly 40 funds in this group tracked by Lipper. The top fund in the class, Vanguard Energy Fund (Admiral) (VGELX.O), lost 4.0 percent in May and 0.5 percent over the last three months. It was up 12.4 percent year-to-date and 40 percent over the last 12 months.

Lipper's Natural Resources Funds Class -- which groups funds with three-quarters of their assets in U.S. markets -- averaged a 4.3 percent loss in May, doing slightly better than their global peers.

In this group of more than 60 funds, the top performer was the SPDR S&P Oil & Gas Exploration & Production ETF. That fund was down 4.4 percent in May and 0.6 percent over the last three months, and up 16.3 percent year-to-date and 49.9 percent over the last 12 months.

Some of the more heavily geared energy funds showed huge losses for May, as well as outsized gains for the last 12 months.

Direxion Energy Bull 3X Shares, which fall under Lipper's Equity Leverage Funds Class, were down almost 14 percent in May, and up nearly 170 percent over the last 12 months.

Some analysts think commodities, particularly oil, could see more selling pressure through the summer if economic slowdown continues to throttle demand.

"Barring gold, which is an alternative play on currency, and grains, that are weather-dependent, I'm bearish on the whole commodities group. I think we're slowing down globally," Edward Meir, senior commodity analyst at MF Global in New York, said at the Reuters 2011 Investment Outlook Summit on Wednesday.

Meir expects U.S. crude to drop 10 percent to around $90 per barrel, and London's Brent crude to fall 20 percent to around $100, over the next three months.

(Reporting by Barani Krishnan, editing by Matthew Lewis)