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Any life in comatose global equity sector?

rcarrick@globeandmail.com

WHAT WE'RE UP TO

Returns from global equity funds over the past decade are appalling. That you know if you've listened to all manner of advice and diversified your holdings outside Canada. What you may not realize is that global funds have been charging their usual fees without letup during this period. Could it be possible that some funds have generated more in fees for the companies that run them than they have in returns for investors? Let's investigate.

TODAY'S SEARCH

The average management expense ratio in the global equity category is 2.87 per cent, pretty much where it has been for years. It's not out of line, then, to say that fund companies have been making 2.87-per-cent returns on average from their global funds over the past decade. In today's cruncher, we present a list of the global funds that have made less than that for their unfortunate unitholders. The funds are ordered by asset size, and we've also included their quartile ranking for the year to date so you can see if any of these coma patients show signs of revival.

SO WHAT DID WE TURN UP?

Several big funds with billions of dollar in assets. If you don't own one of these funds, there's a good chance that someone you know does. Especially dismaying is how many funds on our list lost money over the past 10 years. Even a do-nothing money market fund would have given you 3 per cent annually over this period.

There are 51 global equity funds with a 10-year record, and 38 of them made less than 2.87 per cent annually over the past decade (we have room to show only the largest of them). What this tells you is that global funds in general were horrendous over the past decade. How can this be, when investors are so often urged to expand their horizons beyond Canada?

Blame the strength in our dollar versus the U.S. currency, which undermines returns from the U.S. stocks that are often heavily featured in global funds. Also, Canada has been a stock market dynamo in the past five years because it has a higher concentration of the commodity stocks that have been so strong.

Here's a contrarian thought for anyone tempted to give up on global investing: what if both Canada and global markets revert to their average returns in the years ahead? Global funds might just outperform Canada by a large margin. Just a thought.

Global Equity funds with 10-yr return less than 2.87%

Assets (000s)Last reported10-yr % returnYTD
Fund nameas of Feb. 2008MERMERas of Feb. 2008quartile
Templeton Growth Fund Ltd.3,693,6712/29/20082.231.674
MD Growth3,221,49812/31/20071.442.283
CI Global1,403,4752/29/20082.351.283
TD Global Select935,1912/29/20082.44-0.034
Fidelity Global - A434,8839/28/20072.550.714
Desjardins Global Equity Value304,2801/31/20072.480.434
Renaissance Global Markets229,96111/30/20072.72-0.612
AGF Global Equity Class227,1402/29/20082.701.561
AIM Global Growth Class214,8992/29/20082.941.094
AGF World Companies194,4262/29/20082.700.051
CI Global Value130,5752/29/20082.35-0.143
FMOQ International Equity129,8272/29/20080.951.833
Scotia Global Growth96,0752/29/20082.83-2.112
CIBC Global Equity92,3548/31/20072.77-1.083
Mackenzie Cundill Global Dividend90,4906/29/20072.51-2.711
Northwest Global Equity88,13610/31/20062.872.433
HSBC Global Equity-I64,92012/31/20072.53-0.394
Artisan Maximum Growth Portfolio27,2172/29/20082.780.623
Mackenzie STAR Max Equity Growth17,21912/31/20072.68-0.112
Mackenzie Univ Global Growth13,6576/29/20072.830.623
Bissett Multinational Growth-F12,6722/29/20081.530.422
Sceptre Global Equity - A7,39312/29/20062.61-3.413
FrontierAlt Opportunistic Global-A6,8006/30/20062.821.623
Diplomat Maximum Growth Portfolio6,2182/29/20082.89-0.491
Mackenzie STAR For Max Equ Growth1,81612/31/20072.661.203

SOURCE: GLOBEFUND

© 2007 The Globe and Mail. All rights reserved.

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