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China creates top performers

Demand drives funds that invest in Latin America, resources and Asia

Equity funds that invest in Latin America, natural resources and Asia excluding Japan outperformed all other mutual fund categories in February, according to monthly data compiled by globefund.com.

Strong demand from China was the driving factor for the three top-performing asset classes last month, said senior mutual funds analyst Scott Barlow of CIBC World Markets Inc.

"You've got massive economic growth in China," Mr. Barlow said. "They're importing just unbelievable amounts of raw products and that pushes commodity prices up, which benefits [resource-based] Latin America."

James Gauthier, a mutual funds analyst at Dundee Securities Corp., said it was a good month for most asset classes, because equity markets were strong worldwide.

However, he noted that there wasn't a single category that "blew the doors off" or "was a complete disaster" last month.

The Latin American fund category jumped an average of 5.3 per cent in February to bring the average one-year gain to 68.3 per cent. There are about five funds that participate in this category. Most Latin American indexes tend to have between 80 and 95 per cent of their weighting in Brazil and Mexico, Mr. Gauthier said.

Within that group, TD Latin American Growth, Investors Latin American Growth-C and Fidelity Latin America A were among the best performers, producing average monthly returns of 6.4 per cent, 5.7 per cent and 5.5 per cent, respectively.

The natural resources category climbed an average of 5 per cent in February to bring the average one-year gain to 40 per cent. The group did well because the S&P/TSX energy index and the S&P/TSX materials index both rose in February, Mr. Gauthier said.

"Those two categories are pretty much the resource space," Mr. Gauthier said. "Clearly that has translated into strong returns for the funds that play in the sector."

Dynamic FocusPlus Resource, BMO Resource and AGF Global Resources Class outperformed others in the natural resources group, delivering returns for the month of 10.4 per cent, 9.6 per cent and 8.7 per cent, respectively.

All of the resources funds did well, said Werner Muehlemann, a fund manager at ING Investment Management Inc., who looks after the $13-million ING Canadian Resources fund in Montreal. Improving global economies, a declining U.S. dollar and strong demand from China are all helping commodity prices, he said.

Mr. Muehlemann's fund posted an average monthly return of 8.1 per cent. Among the top holdings in his fund are Alcan Inc., Inmet Mining Corp. and EuroZinc Mining Corp., he said.

The Asia-excluding-Japan category posted an average monthly return of 4.9 per cent. Mackenzie Select Managers Far East Capital-M, Quadrus Mackenzie Select Managers Far East Capital Class and Dynamic Greater China were the top performers in the category, producing average monthly returns of 8.3 per cent, 8.3 per cent and 6.7 per cent, respectively.

Another asset class that performed well was Canadian Small Capitalization, which produced an average monthly return of 4.9 per cent. Top funds in that group included Mavrix Strategic Small Cap, Resolute Growth and O'Donnell Emerging Companies, which posted monthly returns of 9.1 per cent, 8.6 per cent and 8.5 per cent, respectively.

Some of the worst-performing asset classes included Japanese equity and science and technology, according to globefund.com.

The Japanese equity category produced an average monthly loss of 0.01 per cent. Some of the worst-performing funds in that group were CIBC Japanese Equity, AGF Aggressive Japan Class (U.S.) and GWL Japan Equity (Mackenzie) NL, which posted average monthly losses of 2.2 per cent, 1.9 per cent and 1.7 per cent, respectively.

Some of the funds in that group that fared better included CI Japanese Sector Shares, Altamira Japanese Opportunity and Investors Japanese Group-C, which posted returns of 1.2 per cent, 1.1 per cent and 1.1 per cent, respectively.

The science and technology asset class barely posted a return, pulling in 0.01 per cent for the month. Some of the worst-performing funds in that category included AGF Global Technology Class (U.S.), Tera Capital Global Technology (U.S.) and TD Science & Technology (U.S.), with losses of 4 per cent, 2.5 per cent and 2.4 per cent, respectively.

Some funds in that category that did better include Northwest Specialty Innovations, up 6.8 per cent for the month; iUnits S&P/TSX Capped IT, up 3.8 per cent; and Franklin World Telecom RSP, up 3.3 per cent.

Category Performance

Returns as of Feb. 29, 2004

Returns

Fund..........................1-mth...1-yr.

Alternative strategies.........1.9%..18.0%

Asia ex-Japan equity..........4.9...46.2

Asian/Pacific Rim eq.........2.6...37.8

Canadian balanced............2.1...19.1

Canadian bond................1.2....8.2

Canadian dividend............2.6...23.2

Canadian equity..............3.2...31.0

Cdn. Equity (Pure)..........3.4...35.9

Cdn. Income trusts..........3.5...28.1

Cdn. money-market..........0.1....2.0

Canadian motgage............0.8....5.3

Cdn. short-term bond........0.6....5.0

Cdn. small-to-mid-cap eq...4.9...45.0

Cdn. tactical asset alloc......2.2...20.0

Emerging mkts. Equity.......4.4...52.7

European equity...............3.7...40.7

Financial services.............2.3...37.3

Foreign bond...................1.2....2.0

Global bal./asset alloc.........2.1...23.4

Global equity..................2.6...32.4

Health care...................2.2...31.2

High-yield bond...............0.7...15.4

International equity............2.9...38.1

Japanese equity.............-0.01...32.8

Labour-sponsored............-0.1...-1.5

Latin American equity.......5.3...68.3

Natural resources............5.0...40.0

North American equity......2.5...25.6

Precious metals...............1.9...41.0

Real estate...................3.0...24.8

Science & Technology.......0.01...41.6

Specialty/miscel...............0.6...24.7

U.S. equity.....................1.8...24.6

U.S. money market............0.1...-0.2

U.S. small-to-mid-cap eq......2.1...36.3

© 2007 The Globe and Mail. All rights reserved.

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