Last month's stunning rise in cyclical and commodity stocks was just the ticket for resource-loving mutual fund managers who have been badly kicked around during the past three years.
As confidence grew that Asia is set for economic recovery, the comeback stories included:
Trimark Financial Corp., whose three big resource-heavy Canadian equity funds each rose about 10 per cent last month -- well ahead of the 6.4-per-cent gain in the bellwether Toronto Stock Exchange 300-share index -- after more than two years of trailing the index and its competitors. Most Canadian equity funds gained less than 6 per cent in April.
As of March 31, 15.5 per cent of the $3.9-billion Trimark Select Canadian Growth Fund was in oil and gas stocks, far higher than the group's 8.9 per cent weighting in the TSE 300 index. And a huge 13.4 per cent of the fund was in metals and minerals, compared with only 3.6 per cent for the TSE.
BPI Financial Corp.'s Steve Misener, whose $205-million BPI Canadian Small Companies Fund jumped 14.2 per cent in April. In the three years to March 31, the fund posted a stinging annual compound loss of 14.3 per cent.
Mackenzie Financial Corp. founder Alexander Christ, whose $446-million Industrial Growth Fund surged 14.9 per cent in April, the second-best showing by any Canadian equity fund. The fund has posted an annual loss of 4.8 per cent over three years; as of March 31, 53 per cent of its assets were in natural resource stocks.
Wayne Deans of Deans Knight Capital Management Ltd. in Vancouver, whose $229-million O'Donnell Canadian Emerging Growth Fund rose 13.4 per cent last month. The fund has posted an annual compound loss of 10 per cent over three years; half of its top 10 holdings were in resources at the end of March.
"We didn't do anything" to achieve last month's big return, Mr. Deans joked yesterday. "People just decided they wanted to buy our stocks."
The portfolios Mr. Deans runs are currently 30 per cent invested in oil producers and oil-well service companies, which thrived last month as the TSE's energy stock index rose 18 per cent to post the second-best performance of any group. Oil stocks have been lifted by higher crude prices, which have risen above $18 (U.S.) from little more than $12 at the start of 1999 as producing nations apparently stick to production cuts.
Rising prices for nickel and other metals lifted the TSE's metal and mining index by a sizzling 21.5 per cent in April, the biggest gain for any group.
Those strong returns from commodity shares meant Canada was the world's fifth-best performing stock market in Canadian-dollar terms last month, according to Morgan Stanley Capital International.
Fund managers with lower resource weightings had a tougher time keeping up with the market.
Mackenzie's fantastically popular Ivy Canadian Fund, whose assets rose 12 per cent to $6.1-billion (Canadian) in the year ended March 31 even though the TSE 300 slid 11.3 per cent, gained only 0.9 per cent in April.
The company's Web site at www.mackenziefinancial.comdoesn't provide an industry sector breakdown for Canada's biggest domestic equity fund. But as of March 31, manager Jerry Javasky had a massive 38 per cent of the fund's assets in safe but boring cash.
The $1.5-billion Fidelity True North Fund rose a modest 2.5 per cent last month. Up-to-date holdings weren't available on the company's Web site at http://www.fidelity.ca,but Fidelity told brokers last month that manager Alan Radlo "continues to be underweight in most of the resource sectors." At the start of the year, his top 10 holdings didn't include a single resource stock.
The $1.3-billion Altamira Equity Fund, once packed with resources by former high-flying manager Frank Mersch, gained only 3.6 per cent in April.
Current managers Ian Ainsworth, Shauna Sexsmith and Susan Coleman, who took over the fund a year ago, have resisted the temptation to chase bargains in commodities. As of March 31, according to the company's Web site at http://www.altamira.com,only 8.8 per cent of the fund was in energy and 4.4 per cent was in metals.
The fund's broadly mixed portfolio is the result of an order from Altamira Investment Services Inc. chief executive Gordon Cheesbrough, who took over early last year.
"Cheesbrough has pretty well forbidden" the big sector bets that were favoured by Mr. Mersch, said Peter Brewster, editor of Canadian Mutual Fund Adviser, a Toronto newsletter. At one point, he said, Mr. Mersch had loaded 88 per cent of the fund into resources
"A lot of the rest of the industry" is also steering clear of making aggressive calls on sectors, Mr. Brewster said.
The Altamira fund jumped 14.7 per cent in the first four months of the year, well ahead of the 8.8-per-cent gain in the TSE 300, propelled in part by technology stocks, which are Mr. Ainsworth's strong suit.
After three tough years, the former champ is back on top.
Year- Three-year
April to-date annual
Assets return return return
Fund name ($million) (%) (%)* (%)**
Trimark Select Canadian Growth $3,916.7 +9.6% +13.5% +5.6%
Spectrum United Canadian Equity 1,383.3 +8.0 +8.3 +9.9
London Life Canadian Equity# 1,510.5 +6.8 +9.9 +11.1
CIBC Core Canadian Equity 1,124.4 +6.8 +10.3 +11.8
Canada Trust Stock 905.9 +6.4 +8.4 +9.6
TSE 300 index+6.4%+8.6%+11.8%
Investors Canadian Equity 3,089.4 +6.1 +8.8 +4.4
Royal Canadian Equity 2,930.9 +5.7 +6.3 +8.8
First Canadian Equity 1,226.0 +5.6 +8.7 +14.3
Median Canadian Equity fund+5.4%+6.5%+9.8%
MD Equity 1,670.6 +4.7 +3.6 +10.4
AGF Canadian Stock 855.4 +3.9 +5.9 +9.8
Altamira Equity 1,262.9 +3.6 +14.7 +4.0
Universal Canadian Growth 1,950.5 +3.5 +3.3 +13.7
AIC Advantage II 3,825.5 +2.5 +1.9 n/a
Fidelity True North 1,547.0 +2.5 +5.7 n/a
Ivy Canada 6,068.0 +0.9 +2.0 +14.1-*To April 30; **To March 31; #To April 29
Source: http://www.globefund.com; Globe HySales and Bloomberg Financial Services