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Mutual Fund News

Precious-metals category outshines

INVESTMENT REPORTER

TORONTO -- Mutual funds that invest in precious-metal stocks outshone all other fund categories last month, rising sharply in August -- a month in which many types of funds recorded either small gains or declines.

The rally in that group continued a trend that has made precious metals the best-performing group over the last 12 months, with an average increase of 65 per cent. That is vastly superior to any other group of funds; the next largest gain -- 13.2 per cent -- belonged to the natural-resources category.

The gap between the front runner and the second-place finisher in August alone was still wide. Precious-metals funds were up an average of 12.6 per cent in August, buoyed by the rise in the price of bullion to $312.40 (U.S.) an ounce from $303.20 over the course of the month.

The second-best performance came from the Latin American equity group, whose funds advanced an average of 5.2 per cent in August.

The $44-million BMO Precious Metals Fund topped the precious-metals category last month, rising 16.5 per cent, followed by the $2.1-million Sentry Precious Metals Growth Fund, which gained 16.3 per cent, and the $7.5-million StrategicNova World Precious Metals Fund, which advanced 16.3 per cent.

Only one of the category's funds actually lost ground. The $436,000 Cambridge Precious Metals Fund (Sagit) declined 2.4 per cent.

The bullion price naturally factors into precious metal funds' performance, but it is future price movements that are more important than the current price, says Bill Belovay, manager of the BMO Precious Metals Fund.

"This market is an anticipatory market," he says. "Gold shares tend to run ahead of the gold price movements" so the rally in gold shares last month reflected a general view that the price of bullion would rise considerably higher." Bullion closed last Thursday at $318.90.

As for the price going forward, Mr. Belovay says only that he is feeling positive. "I am optimistic because of the environment that we are in now; we are on a war footing," he says.

"So when you are on a war footing, it means there is an abundance of uncertainties, and when there are an abundance of uncertainties, investors go for . . . hard assets and the hard assets are gold."

Funds investing in Latin America were another of the few bright spots last month.

The $4-million StrategicNova Latin America Fund and the $20.6-million Fidelity Latin American Growth-A Fund were among the category leaders, up 7.7 per cent and 7.1 per cent respectively.

Meanwhile, funds investing in Asia outside Japan struggled, producing the worst showing of any category. Even the best performers recorded declines. Among those bringing in the top returns were the $63.9-million TD Asian Growth Fund, which fell just 1.4 per cent, and the $7.2-million Clarington Asia Pacific Fund, which dropped 1.7 per cent.

© 2007 The Globe and Mail. All rights reserved.

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