U.S. stock mutual funds with the biggest losses in the past 10 years, a list topped by Fidelity Growth Strategies and Vanguard U.S. Growth, were crushed by the market sell-off at the start of the decade and never recovered.

The Fidelity fund fell 67 percent and Vanguard’s lost 50 percent, according to data from Morningstar Inc. The 10 worst- performing diversified funds that still manage at least $1 billion tumbled an average of 43 percent in the decade through Dec. 28, about five times the decline of the Standard & Poor’s 500 Index, a benchmark for the biggest U.S. stocks.
The group’s performance underscores the lasting damage from the March 2000 to October 2002 bear market that followed the collapse of Internet stocks. Fidelity Growth Strategies, which oversees $1.93 billion, hadn’t recouped the 86 percent loss incurred during the technology bust when stocks started falling again in October 2007 amid the onset of the housing crisis.
“A lot of funds and fund companies suffered mightily and haven’t come back,” Geoff Bobroff, a mutual-fund consultant in East Greenwich, Rhode Island, said in a telephone interview.
The 10 worst funds all focused on shares of growth companies, so designated because their sales or earnings are rising faster than their industry’s or the overall market. The group fell 71 percent on average after the technology bubble deflated. That compared with the 47 percent decline by the S&P 500 index from March 24, 2000, to Oct. 9, 2002.
A bear market is typically defined as a decline of at least 20 percent from peak to trough.
The Internet debacle didn’t dampen investor enthusiasm for stocks. Equity mutual funds attracted $166 billion in 2003, roughly four times the cash that flowed into bond funds, data from Chicago-based Morningstar show.
Investors shunned stocks in favor of bonds following the second bear market of the decade, when the S&P 500 index fell 55 percent from Oct. 9, 2007, to March 9, 2009. The 10 worst funds dropped 51 percent in that period, according to data compiled by Bloomberg.
Bond funds attracted $329 billion in the first 11 months of 2009, compared with $3 billion for stocks funds, Morningstar found.
“The enormity of the disaster in 2008 turned people off to equities,” said Burton Greenwald, an independent fund consultant based in Philadelphia.
Mutual-fund companies, including Fidelity, Los Angeles-based Capital Group Cos. and Boston-based Putnam Investments, eliminated jobs as assets under management shrank in 2008 and early 2009.
(Source: Bloomberg)