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Science, tech funds take a breather

Average gain for year drops in sync with sagging technology-rich Nasdaq index

Equity funds that invest in science and technology took a step back in September as the stock market's across-the-board rally ran out of steam.

Science and tech funds dipped an average of 4 per cent last month to trim the group's average gain for one year to 35.1 per cent.

Among top-performing funds, the $4.5-million Northwest Specialty Innovations fund gained 6.9 per cent, the $64.6-million iUnits S&P/TSX Capped IT fund rose 4 per cent, and the $13.3-million Fidelity Focus Telecommunications-A fund added 2.3 per cent.

The $82.4-million StrategicNova Canadian Technology fund climbed 1.7 per cent.

Duncan Stewart, a partner at Tera Capital Corp. and manager of the StrategicNova fund, notes that in the United States, the Nasdaq composite index sagged 2 per cent in September.

"I think it was just taking a breather," he said of the technology-rich index.

Canadian mutual funds that buy U.S. technology stocks took an added hit because the U.S. dollar weakened during the month, he added.

Mr. Stewart noted that "third-quarter jitters" are not unusual in September as investors anticipate the earnings reporting season, which hits its stride in mid-October.

He added that profit warnings from technology companies were fairly rare in September, but a few companies, such as Zarlink Semiconductor Inc., did brace the market for poorer-than-expected financial results.

He said investors likely took some profits because they were afraid that the stock market rally had got ahead of expectations.

Mr. Stewart said Canadian technology stocks, meanwhile, chalked up a 2-per-cent gain for a better showing than those in the United States in September.

Much of the performance was driven by big names such as Nortel Networks Corp. and Research In Motion Ltd., Mr. Stewart said.

In the broader Canadian market, stocks slipped in September. The S&P/TSX composite index edged down 1.1 per cent.

Canadian equity funds lost an average of 1.3 per cent last month, in line with the index's decline. For the 12 months to Sept. 30, funds in the category have gained 14 per cent on average.

In September, the $323,000 University Avenue Canadian fund led the pack with a 15.9-per-cent jump, the $1.4-million Floyd Growth-Net fund swelled 6.5 per cent, and the $212.3-million Sprott Canadian Equity fund added 3.5 per cent.

Mutual funds that invest in Canadian small-capitalization stocks were flat in September with a 0.39-per-cent rise on average. For one year, the group's average advance now stands at 18.6 per cent.

The $3.5-million Dynamic Quebec fund rose 4.7 per cent and the $1.4-million Stone & Co. Flagship Growth Industrial-A increased 4.3 per cent last month.

Funds that invest in Japanese stocks had the best showing in September. The average gain for the group was 3.1 per cent, for a 12-month return of 6.4 per cent, on average.

The $911,000 GGOF Japanese Value fund surged 10.9 per cent, the $1.9-million AGF Aggressive Japan Class fund gained 9.9 per cent, and the $24.9-million Altamira Japanese Opportunity fund rose 8 per cent.

Precious metals equity funds were also winners last month. The gold group gained an average of 2.2 per cent for an average one-year advance of 32.1 per cent.

The $350.4-million RBC Precious Metals fund increased 6 per cent, the $164.7-million AGF Precious Metal fund rose 5.7 per cent, and the $56.2-million Altamira Precious & Strategic Metal fund added 5.3 per cent.

© 2007 The Globe and Mail. All rights reserved.

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