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Mutual Fund News

Big stock funds post mixed January results

Only 7 of 30 largest had positive returns


Only seven of the 30 largest Canadian stock funds showed a positive return in January and just 11 of the big actively managed funds fared better than the Toronto Stock Exchange 300 composite index in that period.

The TSE 300 lost 0.4 per cent last month -- a rocky period marked at first by optimism about the market and then later by investor concern about profits, accounting policies and the strength and timing of the economic recovery. The decline in the TSE 300 includes reinvested dividends.

The big funds, for their part, had a mixed showing in January. The worst performing fund, Investors Summa Fund, was down 2.6 per cent, while the best showing belonged to Mackenzie Universal Canadian Growth Fund. It was up 2 per cent.

A quick scan of the results seems to show no central theme. Some growth funds did reasonably well; others didn't. The same was true for funds with a value orientation.

However, Scott Barlow, a mutual fund analyst at CIBC World Markets Inc., sees a common thread among the best performers. He said the element that separated those funds from the rest of the group is their focus on valuations. "Big or not, growth or not, value or not . . . these are all very valuation focused funds," he said.

For five years, many managers sought out stocks with the highest growth rates, without giving much regard to the prices being paid for that growth, he said. "Now you look at growth and what you are willing to pay," Mr. Barlow said, noting that it is a "much more conservative way to invest."

Mackenzie Universal Canadian Growth follows that approach. The fund, which had assets of $1.6-billion at the end of last month, captured top spot in the performance rankings for the month .

"Our ideal company does have a growth profile to it, but we also want to get that company at the price that makes sense to us," said portfolio manager Phil Taller. "We love growth, but we are not chasing it at any price."

The fund's managers took the opportunity presented by last year's market weakness to acquire high-quality stocks at attractive prices. At the end of 2000, the fund was only about 75 per cent invested in equities. The remainder was in cash. Foreign content in the fund was just under 20 per cent.

Since then, the equity portion has grown to 89 per cent, while cash has fallen to just over 10 per cent. Foreign content, meanwhile, has increased to about 26 per cent by market value.

Some of the stocks acquired during the portfolio changes did well last month, Mr. Taller said. He specifically cites auto parts supplier BorgWarner Inc. and DeVry Inc., which owns and manages educational institutes.

Also, "the steel stocks started to turn around a bit," he said. And Finning International Inc. shares "perked up."

But many funds struggled last month. Among the poorest performers were Investors Summa and AIM Canadian Premier Class Fund, down 2.6 per cent and 2.5 per cent respectively.

Jason Holzer, co-manager of AIM Canadian Premier Class, cautions against judging a fund on one month's performance. "We have rebounded strongly in February and we don't think that January is reflective, at all, of our outlook for the fund," he said.

Last month, the fund's showing was hampered by the fact that it had virtually no exposure in the three best-performing TSE sectors so far this year -- golds and precious minerals, forest products, and metals and mining.

Scott Penman, managing partner of I.G. Investment Management Ltd., noted that Investors Group Inc.'s Summa is a growth fund and "that type of fund did extremely well in the last quarter of . . . 2001." But the markets peaked very early in January and after that, a "lot of stocks that had [posted] huge runs had a correction," he said.
How the big funds fared in January
The 30 largest Canadian equity and large-cap funds, ranked by asset value as of Jan. 31, 2002. Excludes pooled funds.

                                        1-month    Net assets

Fund name                               return     ('000)Mackenzie Univ. Canadian Growth         +2.0%      $1,658,719

Mackenzie Univ. Future                  +0.7        1,511,680

CI Harbour Fund                         +0.6        1,392,864

Investors Canadian Equity               +0.4        2,361,022

Royal Canadian Equity                   +0.3        3,611,356

Trimark Canadian Endeavour              +0.2        1,377,762

Trimark Select Canadian Growth          +0.1        3,645,171

AIC Advantage II                        -0.1        2,679,486

Trimark Canadian - SC                   -0.3        1,962,532

Spectrum Canadian Equity                -0.3        1,531,258

London Life Canadian Equity             -0.3        1,942,992

MD Equity                               -0.4        1,711,742

TD Canadian Equity                      -0.4        1,351,706

Fidelity Disciplined Equity-A           -0.5        1,151,222

AIC Advantage                           -0.5        2,555,060

SEI Canadian Equity                     -0.6          864,285

Fidelity True North-A                   -0.6        2,876,080

Dynamic Power Canadian Growth           -0.8        1,096,304

BMO Equity                              -1.0        1,418,686

AGF Canadian Stock                      -1.0        1,849,099

Investors Canadian Large Cap Value      -1.1        1,865,912

Altamira Equity                         -1.2        1,139,840

PH & N Canadian Equity                  -1.3        1,052,307

CIBC Core Canadian Equity               -1.5        1,962,758

Mackenzie Ivy Canadian                  -1.5        5,263,498

Scotia Canadian Blue Chip               -1.8          758,531

AIM Canadian Premier                    -2.1          783,539

AIC Diversified Canada                  -2.3        3,686,564

AIM Canadian Premier Class              -2.5          992,428

Investors Summa                         -2.6        2,650,910

© 2007 The Globe and Mail. All rights reserved.

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