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Mutual Fund News

High-climbing funds can fall hard

swon@globeandmail.com

WHAT ARE WE LOOKING FOR?

The big losers among mutual funds in the recent Canadian stock market meltdown.

A sharp retreat in commodity stocks sent the S&P/TSX composite index tumbling 12 per cent by this past Tuesday from its record high of 15,073 points on June 18.

Falling crude prices have weighed heavily on oil stocks.

Gold and fertilizer stocks have also been under selling pressure recently. Fertilizer giant Potash Corp. was the biggest single drag on the index on Tuesday, tumbling 12.8 per cent to $180.50.

TODAY'S SEARCH

We checked out the returns of Canadian equity and Canadian focused equity funds (which can invest up to 50 per cent in foreign stocks) from June 18 to Aug. 5.

SO WHAT DID WE TURN UP?

The higher that stock funds climb, the harder they can fall.

Dynamic Power Canadian Growth, run by veteran portfolio manager Rohit Sehgal, was the top-performer among Canadian focused equity funds over one, three, five and 10 years to June 30.

But his fund, which was 80 per cent invested in energy and materials stocks, also suffered the most during the recent downturn. It fell 19 per cent in about seven weeks.

The top 10 holdings at the end of June included Petrobank Energy and Resources Ltd., Nexen Inc., Pacific Rubiales Energy Corp., Duvernay Oil Corp., Potash, Agrium Inc. and Research In Motion Ltd.

In a recent interview, Morningstar Canada fund analyst Jordan Benincasa described Dynamic Power Canadian Growth as a "turbo-charged growth fund" with an aggressive trading strategy.

"There is nothing wrong with it - that's the strategy," he said. "But investors should be aware of the downside risks of that strategy."

The Manulife Canadian Core Fund, run by Pat McHugh, was 53 per cent invested in energy and materials stocks at June 30. That fund, which lost 16 per cent, held stocks like Potash, EnCana Corp., Agrium, Nexen and Suncor Energy Inc. among its top holdings.

TD Canadian Equity Fund, under manager John Smolinski, was 65 cent invested in energy and materials stocks at the end of June. Its top stocks included Nexen, Suncor Energy, EnCana, Canadian Natural Resources Ltd., Potash and Research In Motion. The fund was off 15.6 per cent.

Even socially responsible funds were not immune.

The Investors Group Summa SRI Fund, Canada's largest socially responsible fund co-managed by Daniel McClure and Keith McLean, fell 14 per cent. The top holdings at May 30 included Potash, Research In Motion, EnCana, Pacific Rubiales, and Trican Well Service Ltd. It was 65 per cent invested in energy and materials stocks.

***

Top 25 worst-performing Canadian funds

As of June '08% return% return as of July 2008
Fund nameCategoryAssets ($-mil)MERJun 18 - Aug 5YTD1-yr3-yr5-yr
Dynamic Power Canadian GrowthCdn Focused Equity20453.56-19.33-4.344.6517.4725.00
Investors Canadian Growth-ACdn Focused Equity1482.77-18.26-5.13-3.83
Acuity Social Values Canadian EquCanadian Equity522.85-18.21-11.57-15.044.4412.01
Acuity Canadian EquityCanadian Equity812.85-17.99-8.94-12.934.9813.00
Norrep Q Class-ACanadian Equity-16.92-12.18-20.457.35
Acker Finley Select Canada Focus-ACanadian Equity432.07-16.91-6.37-12.065.37
Landry Morin Cdn momentum-FCanadian Equity1.79-16.765.2714.5816.4119.76
imaxx Canadian Equity GrowthCanadian Equity282.68-16.57-3.42-2.7213.8317.08
Manulife Canadian Core FundCanadian Equity3722.41-16.41-5.91-3.919.9115.65
AGF Canadian All Cap EquityCanadian Equity8-16.29
Acuity Pure Canadian EquityCanadian Equity15-16.20-7.31
Altafund Investment Corp.Canadian Equity812.71-16.022.826.8613.6120.20
TD Canadian EquityCanadian Equity34662.09-15.643.256.1115.1919.45
iShares CDN Growth IndexCanadian Equity500.50-15.614.0914.53
Manulife Canadian Equity FundCdn Focused Equity4962.45-15.43-1.96-2.0910.4613.71
Altamira EquityCdn Focused Equity7622.63-15.16-0.463.1610.8213.94
Keystone Sceptre Canadian Lrg Cap-ACanadian Equity292.62-15.05-3.03-4.6212.0014.13
Desjardins EnvironmentCanadian Equity1462.35-14.831.944.0315.5017.52
PH&N Vintage-ACdn Focused Equity821.85-14.704.614.3911.0912.69
Stone & Co. Flagship Stock-BCdn Focused Equity503.08-14.69-16.22-13.942.1510.66
Sceptre Canadian Equity-OCanadian Equity155-14.29-2.81-2.6315.9117.96
OTG DiversifiedCanadian Equity1.30-14.18-6.06-11.628.7914.42
Ethical Canadian StockCanadian Equity581-14.14-5.86-2.96
Investors Summa SRI FundTM ACdn Focused Equity17492.69-13.99-6.50-9.276.629.51
Bissett All Cdn Focus ACanadian Equity432.59-13.98-3.22-4.9710.47
S&P/TSX Composite -12.15 -1.74 -1.99 9.25 13.37

Note: Funds are valued daily SOURCE: GLOBEFUND

© 2007 The Globe and Mail. All rights reserved.

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