2019 is in the history books, and overall, the stock market performed extremely well. Even many broad-based index mutual funds produced returns of 20% or more, and some of the top performers had even better gains for their shareholders.

However, there were still a few pockets of underperformance in the market in 2019, and that hurt some of the mutual funds that sought to make money with strategies that focused on those weaker stocks. Below, we'll look more closely at some of the poorest mutual fund performers in 2019 to see what went wrong and whether a comeback's in the cards in 2020.

Three losing mutual funds in 2019


Assets Under Management

2019 Return


$1.42 billion


Vanguard Market Neutral Fund (NasdaqMUTFUND: VMNFX)

$715 million


AQR Style Premia Alternative Fund (NasdaqMUTFUND: QSPIX)

$2.39 billion


Data source: Fund companies.

Taking it in the shorts

PIMCO StocksPLUS has what sounds like a simple strategy: bet against the S&P 500 Index and instead invest in fixed-income securities to try to generate some additional return. The fund uses a variety of derivative securities to achieve its investment objective, and by all accounts, PIMCO StocksPLUS did exactly what it was designed to do in 2019.

Glasses magnifying a newspaper page titled mutual funds.

Image source: Getty Images.

Unfortunately, betting against the stock market hasn't been a smart move in recent years, and the performance of PIMCO StocksPLUS tells a sad tale. Losses in five out of the past six years reflect the staying power of the bull market of the 2010s.

Investors in this fund need to understand that they're essentially counting on a reversal of fortune in the stock market. That might come in 2020, but based on the recent past, the odds are against those expecting a bounce for PIMCO StocksPLUS.

Staying neutral

A different strategy involves trying to take a balanced view on the stock market, investing in some individual stocks but then selling others short. The idea for Vanguard Market Neutral and similar funds is to generate returns that aren't correlated to the stock market but exceed what you can get from fixed-income investments like bonds or bank accounts.

That hasn't worked out well for the Vanguard fund, which ended its third-straight year of producing weaker returns than a three-month Treasury bill. The culprit: poor stock selection in deciding which companies in a particular sector to own and which to sell short.

Not all market neutral funds suffered losses in 2019, but just about all of them fell far short of beating the stock market. These funds will typically do relatively well during bad years for stocks, but losses this large are surprising for a fund with this investment objective.

Looking beyond stocks

Finally, some investors preferred funds that included not only stocks but also other types of investments. AQR Style Premia Alternative follows an investment objective that avoids correlation to stock and bond markets by adding asset allocation exposure to currencies and commodities, as well as using a similar combination of long and short positions that market neutral funds employ.

2019 marked the second year in a row of poor performance for the AQR fund. Overall, the fund has lost money over the past five years, leaving investors short of even what they would've earned in an FDIC-insured bank savings account.

AQR has had some strong years in the past, including double-digit percentage positive returns in 2014 and 2017. However, it's uncertain whether the fund will be able to bounce back in 2020.

Can these funds recover?

Many fund investors hope that losing investments will produce gains in future years. However, the Vanguard and AQR funds will have to address execution issues in order to reverse their poor performance in 2019. Meanwhile, for PIMCO StocksPlus, it'll take a down year for the stock market in 2020 to deliver positive returns for its shareholders.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.