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Put your financial adviser on a leash
February 11, 2000
100% Foreign content for your RSP
December 22, 1999
Tax Loss Selling or Dealing With Your Mistakes
November 26, 1999
Life Stages of your RRSPs
November 12, 1999
Just give me boring (but great) rates of return
November 3, 1999
De-mystifying Demutualization - part Two
October 25, 1999
De-mystifying Demutualization - part One
October 19, 1999
Seg funds for the simple minded
September 14, 1999
The interest rate game Part 2
August 12, 1999
The interest rate game Part 1
July 30, 1999
Choosing funds: Five for the long run
July 14, 1999
New Funds: To buy or not to buy
July 2, 1999
Making sense of momentum investing
June 18, 1999
Rating the fund managers
June 4, 1999
Resource recovery hinges on supply and demand
April 30, 1999
Tech funds draw strength from favourable trends
March 24, 1999
Withdrawing from your RRSP
March 9, 1999
The economic implications of the euro - An interview with Ranga Chand
February 12, 1999
Underperforming small-cap funds have strong upside potential
January 29, 1999
How to pick a winning equity fund portfolio
January 15, 1999
View the Weekly Insight archive
   

Rating the fund managers

RANGA CHAND
From Chandís World of Mutual Funds, 1999 Edition
Friday, June 4, 1999

[ Book Cover ] This column has been excerpted with permission from Chand's World of Mutual Funds, 1999 Edition, published by Stoddart Publishing. Copyright 1998 by Ranga Chand.
As investors, we all want to know who the top-performing fund managers are.  Many companies prefer the anonymity of a team approach, while others highlight their "star" fund managers.  The key to assessing a manager's ability is to see how the manager has done relative to his or her peer group in terms of both performance and risk -- looking only at a fund's returns ignores risk, the other important half of any investment equation. A fund that consistently beats the competition may also be one that is taking on more risk.

To help investors gauge a fund manager's overall performance, and in response to repeated requests from readers, we have developed a quantitative measure called the skill ratio.  This skill ratio takes into account both the fund's risk and its relative returns, and is derived, accordingly, from the fund's performance index and its risk index.

  • Performance Index -- This is a relative measure of a fund's performance, namely the ratio of a fund's five-year return to the average for its category.  A performance index of 1.00 is average.  A ratio higher than 1.00 indicates that a fund delivered above average returns, whereas a ratio lower than 1.00 indicates below-average performance.
  • Risk Index -- This is the ratio of a fund's five-year standard deviation to the average standard deviation of all funds in its category.  As in the case of the performance index, a risk index of 1.00 is average.  A ratio higher than 1.00 indicates above-average risk, whereas a ratio below 1.00 indicates below-average risk.
  • Skill Ratio -- This composite measure combines a fund's relative performance and risk to provide the investor with a measure of a fund manager's overall performance. A skill ratio above 1.00  indicates superior overall performance.
Top fund managers

Table: Top 10 Canadian Equity Fund Managers

Table: Top 10 International Equity Fund Managers

Table: Top 10 Canadian Bond Fund Managers

The Selection Process

Who are the leading Canadian equity, international equity, and Canadian bond fund managers? At the outset, we screened out co-managed funds, unless a lead manager was indicated, as well as those managed by a team.  Our first criterion in determining the top 10  fund managers in each category was tenure -- a portfolio manager must have been at the helm of his or her fund for a minimum of five years. (The cut-off date was May 31, 1998.)

The second criterion was that fund managers deliver above-average returns in their respective categories. Skill ratios were calculated for all managers and, based on the above indices, those that scored in the top 10 in each of the three investment categories made the list.  The tables below show the performance, risk, and skill ratios of each of these Heavy Hitter fund managers and, in the case of Canadian and international equities, also gives their investment styles.

Highlights

Interestingly, all the top 10 Canadian equity fund managers follow a bottom-up management style where the emphasis is on selecting promising individual companies.  Amongst this group, six are value investors, two are growth investors, and the other two follow a blended approach in selecting securities for their portfolios.

By contrast, three of the top 10 international equity fund managers follow a top-down management style where the emphasis is on the big picture rather than individual companies. Four of the managers are growth investors, three are value investors, and three follow a blended approach.  Two Templeton fund managers -- Mark Holowesko for the Growth Fund and Don Reed for the International Stock Fund -- made this list of top performing portfolio managers.

Among the Canadian bond fund managers, five took on more risk relative to their peer group but all compensated for this by delivering superior returns. Gary Feltham, manager of two of Calgary-based Mawer's funds -- the Canadian Income Fund and Canadian Bond Fund -- is on the list of top 10 bond fund managers.

Ranga Chand is a leading independent economist and mutual fund analyst and is President of the research firm Chand Carmichael & Company Limited. He is also the author of the national bestseller Chand's World of Mutual Funds 1999 Edition and Ranga Chand's Getting Started with Mutual Funds, both available through the GLOBEfund Bookstore.

You can now visit Ranga Chand's new web site located at www.worldoffunds.com.


Top 10 Canadian Equity Fund Managers
  Manager Fund Performance
Index
Risk
Index
Skill
Ratio
Investment
Style
1 Tim McElvaine1 Cundill Security "A" 1.36 0.61 2.24 Bottom-Up/Value
2 George L. Frazer Associate Investors 1.45 0.78 1.86 Bottom-Up/Blend
3 Francis Chou Chou RRSP 1.45 0.89 1.62 Bottom-Up/Value
4 Fred Pynn Bissett Canadian Equity 1.54 0.97 1.58 Bottom-Up/Growth
5 Irwin A. Michael ABC Fundamental Value 1.73 1.16 1.50 Bottom-Up/Value
6 Ian Ihnatowycz Clean Environment Equity 1.54 1.05 1.47 Bottom-Up/Value
7 Guy LeBlanc Cote 100 Amerieque REER 1.46 1.11 1.32 Bottom-Up/Growth
8 John Smolinski Royal & SunAlliance Equity 1.19 0.91 1.31 Bottom-Up/Value
9 Richard Howson Saxon Stock 1.22 0.95 1.28 Bottom-Up/Value
10 Catherine (Kiki) Delaney2 Spectrum United
Canadian Equity
1.15 0.93 1.24 Bottom-Up/Blend
1 Tim McElvaine is no longer the manager of the Cundill Security fund.
2 Kiki Delaney is no longer the manager of Spectrum United Canadian Equity Fund. She recently moved to Trimark.


Top 10 International Equity Fund Managers
  Manager Fund Performance
Index
Risk
Index
Skill
Ratio
Investment
Style
1 Bill Kanko3 Ivy Foreign Equity 1.31 0.57 2.31 Bottom-Up/Blend
2 Mark Holowesko Templeton Growth Fund 1.25 0.79 1.59 Bottom-Up/Value
3 Robert Tattersall Saxon World Growth 1.31 0.85 1.54 Bottom-Up/Value
4 Donald F. Reed Templeton International Stock 1.47 0.96 1.53 Bottom-Up/Value
5 Dick Haberman Fidelity International Portfolio 1.34 0.89 1.51 Bottom-Up/Growth
6 James H. Shakin Cornerstone Global4 1.16 0.83 1.40 Top-Down Growth
7 Guy Normandin Talvest Global RRSP 1.07 0.88 1.22 Top-Down/Growth
8 Gerald A. Cooper-Key Mawer World Investment 1.21 1.00 1.21 Bottom-Up/Blend
9 Bill Sterling C.I. Global 1.12 0.95 1.19 Top-Down/Blend
10 John Boich Canada Trust International Equity 1.01 0.95 1.06 Bottom-Up/Growth
3 Bill Kanko is no longer the manager of Ivy Foreign Equity fund. He has also moved to Trimark.
4 The Cornerstone Global fund is now known as IRIS Global Equity. James Shakin is still the manager.


Top 10 Canadian Bond Fund Managers
  Manager Fund Performance
Index
Risk
Index
Skill
Ratio
1 Clive Coombs AGF High Income 1.02 0.66 1.55
2 John Zechner C.I. Canadian Bond 1.17 0.85 1.38
3 Robert Ciamarro5 Ferique Bond 1.12 0.88 1.28
4 Gary J. Feltham Mawer Canadian Income 1.11 0.90 1.23
5 Carmand Normand Batirente-Section Obligations 1.28 1.06 1.20
6 Michael Quinn Bissett Bond 1.19 1.02 1.17
7 John W. Braive MD Bond 1.14 1.03 1.12
8 Gary J. Feltham Mawer Canadian Bond 1.07 0.98 1.09
9 Greg Latremoille Beutel Goodman Private Bond 1.10 1.07 1.03
10 Jeff Waldman NN Bond 1.16 0.15 1.01
5Robert Ciamarro is no longer the manager of Ferique Bond.


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