One of the nastiest bear markets on record is nearly 2½ years old, but many fund investors are coming through unscathed -- or even ahead of the game.
The S&P/TSX total return index has ground out annualized losses of 12.5 per cent over the two years and five months since March 31, 2000 -- when it's generally agreed the bear market began -- plunging from 9,463 then to 6,611 on Aug. 31 of this year -- a cumulative loss of 30 per cent.
In the United States, the S&P 500 composite index has suffered annualized losses of 14.9 per cent over that period, while the Nasdaq composite index posted an annualized loss of 38.5 per cent.
So here is a look at how some of the most widely held equity and balanced funds have fared in the face of these grim statistics.
We examine a 11 such funds -- which together account for almost $50-billion in assets -- with the aid of four industry experts:
Gordon Pape, mutual fund book author;
Dan Hallett, senior fund analyst at Windsor, Ont.-based Sterling Mutuals Inc.;
James Gauthier, fund analyst at Toronto-based Dundee Securities Corp.;
Steve Kangas, fund analyst at Fundlibrary.com.
Surprisingly, seven out of the 11 funds actually posted annualized compound gains, ranging between 3.3 per cent and 7.5 per cent, over the past 29 months, while the four losers posted modest annualized losses of between 1.2 per cent and 4.9 per cent. (Performance figures for the past year are for the 12 months ended Aug. 31.)
Canadian equity funds
Mackenzie Ivy Canadian. This $5.2-billion fund, managed by veteran Jerry Javasky, posted annual compound gains of 7.5 per cent since the bear market began.
In the past year, it managed a 1.7-per-cent gain while the TSX total return index lost 9.1 per cent.
"This value fund has been a standout and I expect more of the same," Mr. Hallett says. It offers good exposure to conservative, large-capitalization stocks, with solid diversification and low volatility, he adds.
Trimark Select Canadian Growth. Over the same period, this $3.5-billion fund also reported 7.5 per cent in annual compound gains, and the credit clearly goes to its manager, Heather Hunter, for her stock-picking ability, Mr. Pape says. She favours large-cap stocks, uses a buy-and-hold approach and her outperformance has continued in the past year, he adds.
The fund reported a scant loss of 0.2 per cent compared with the 9.1 per cent drop in the TSX .
Royal Canadian Equity. This $3.1-billion equity fund was not as successful, posting annual compound losses of 4.9 per cent throughout the bear market so far -- but still an outperformer compared with the 12.5 per cent in annualized losses of the TSX index over that period. In the past year it lost 4.6 per cent, while the TSX fell by 9.1 per cent.
"This is a large-cap Canadian equity fund that's about 10 per cent invested in gold, because the manager John Embry specializes there," Mr. Gauthier says.
It's a relative outperformer, and could be the answer for people who want an equity fund with an unusually high gold exposure, he says.
Investors Canadian Equity. Under manager Paul Hancock, this $2.1-billion value fund reported annualized losses of 1.2 per cent since the bear market's onset, Mr. Kangas says.
The fund lost 8.2 per cent in the past 12 months. "But over all, it's been a solid performer, beating its benchmarks, and I think it will see better days when Canadian stocks recover," Mr. Kangas says.
Canadian balanced funds
Mackenzie Ivy Growth and Income. The $3.5-billion Mackenzie Ivy Growth and Income fund has produced annualized returns of 7.3 per cent since March of 2000 and in the past year it has gained 3.8 per cent. Conservatively managed by Mr. Javasky, it holds about 30 per cent in Canadian bonds, with the rest in Canadian and foreign stocks. Mr. Hallett says he's "not nuts about balanced funds," because investors can easily buy government bonds themselves and avoid management fees. "But for people with smaller sums to invest, who want a one-decision fund, this is certainly a good one."
Trimark Select Balanced. Here's another fund that sailed through the slump, clocking annualized returns of 5 per cent over the past 29 months. But in the past year it has lost 4.4 per cent. That's more than the 1.1-per-cent loss for the balanced-fund benchmark, the blended TSX composite and Scotia Universe bond index.
The $2.6-billion fund has a rather heavy 64-per-cent weighting in equities, managed by Ian Hardacre and another 33 per cent in bonds, managed by Rex Chong, Mr. Pape notes. "This fund has had above-average returns in the past, but its performance has recently deteriorated and I'd say you can now find better options in the Trimark lineup."
Royal Balanced.This mammoth $6.4-billion fund has had annualized losses of 3.8 per cent since the bear market began, slightly more than the 3.7 per cent annualized losses for the balanced-fund benchmark. In the past year it lost 4.7 per cent.
"This has been one of the poorer balanced funds around for a long time," Mr. Kangas says. Managed by the RBC global investment management team, it has been a third-quartile performer over the past one-, three- and five-year periods on an average-annual-compound-return basis, he says.
Global equity funds
Trimark Select Growth This huge $6.1-billion global equity fund has been a star performer so far in this bear market, with annualized returns of 7.4 per cent compared with the annualized 16.5-per-cent losses for its benchmark, the MSCI world index. Though classified as a global fund, it is 70-per-cent invested in the United States, with another 18 per cent in Japan and Britain combined. "I guess I'd like to see a little more international diversification, but it's hard to argue with this kind of success; it's been a steady first-quartile performer for the past 10 years," Mr. Pape says.
AGF International Value.Another outperformer, this fund clocked annualized compound returns of 3.3 per cent since the market slump began. The $5.8-billion fund was managed by San Diego-based Brandes Investment Partners LLC until June of this year and is now run by Chicago-based Harris Associates LP, who are also value managers, Mr. Hallett says.
It has lost 16.9 per cent in the past year, about the same as the 16.3-per-cent loss of its MSCI world benchmark, but Mr. Hallett doesn't advise bailing out: "The new managers have a good record in the U.S. and I'd advise people to sit tight and give them a chance."
Templeton Growth. This venerable value fund, managed by George Morgan for the past 18 months, has reported annual compound losses of 4.4 per cent since the bear market began and has lost 12.1 per cent in the past year, making it a relative outperformer compared with a 16.3-per-cent loss of the MSCI world index. Mr. Gauthier says it's still a good bet for conservative investors who want a global value fund. "Morgan is a strong manager who's investing heavily in Europe, where valuations are very attractive. "I think this fund will do well again."
Investors U.S. Large Cap Value.This $2.4-billion fund has reported annualized gains of 4.6 per cent since March of 2000, a far cry from the S&P 500's annualized losses of 14.9 per cent since then. In the past year it has lost 9.9 per cent compared with that index's loss of 17.4 per cent.
This is an outstanding U.S. equity fund, run by value manager Terry Wong, Mr. Kangas says.
"It's been a first-quartile performer over the past one, three and five years."
© 2007 The Globe and Mail. All rights reserved.
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