WHAT WE'RE UP TO
A fresh look at the debate about whether it's better to invest in index funds and exchange-traded funds that provide the returns of various stock and bond indexes, or to buy mutual funds run by managers who use their expertise to choose the best stocks.
It's common to see mutual funds condemned for not meeting long-term index returns on average, but that's hardly fair. After all, fees reduce the returns from index funds and ETFs, just as they do regular mutual funds. Of course, the fees for index investments are much lower.
Here, we screen for Canadian equity and dividend funds that made more than 11.38 per cent annually over the 10 years to Aug. 31, which is the 11.63-per-cent average annual return of the S&P/TSX composite index reduced by 0.25 of a percentage point to account for fees. Note: 0.25 per cent is the management expense ratio of the iShares Cdn Composite Index Fund, an ETF tracking the composite index (the ticker symbol is XIC).
SO WHAT DID WE TURN UP?
First, some context. Globefund.com tells us there are 65 Canadian equity and dividend funds with a 10-year history. As you can see from the screen results, there are 21 funds in both categories that beat the 10-year S&P/TSX composite return, minus the fee for an easily obtainable ETF. It's commonly said that buying the index means you'll outperform a majority of mutual funds, and our screen results bear this out.
But what of the funds that did beat the index? Indexing aficionados admit there are always funds outperforming the major stock indexes, but they counter by saying that past performance is no guarantee of future success. Still, it's worth taking a closer look at our index beaters.
Low fees seem to be a common, though not universal, feature. Several dividend funds made the list, even though they've suffered lately from heavy exposure to the troubled financial sector. Several big fund companies are represented, but there's also a heavy representation of smaller money managers like Mawer, Leith Wheeler and Saxon.
|As of Aug. 2008|
|Fund name||Category||MER||Net Assets ('000)||10-year % return||1-year quartile|
|SEI Canadian Equity-O||Canadian Equity||0.1||2,379,994||14.81%||1|
|TD Canadian Equity||Canadian Equity||2.1||3,266,575||13.78%||1|
|OTG Growth||Canadian Equity||1.3||13.51%||2|
|Fidelity Canadian Large Cap-A||Canadian Equity||2.5||63,266||12.85%||1|
|Standard Life Cdn Dividend Growth-A||Canadian Dividend and Income Equity||2.0||2,088,784||12.75%||3|
|Fidelity True North-A||Canadian Equity||2.4||1,170,907||12.72%||1|
|Leith Wheeler Canadian Equity B||Canadian Equity||1.5||167,012||12.59%||3|
|Mawer Canadian Equity||Canadian Equity||1.2||101,554||12.58%||3|
|Saxon Stock Fund||Canadian Equity||1.9||399,019||12.54%||4|
|TD Dividend Growth||Canadian Dividend and Income Equity||1.9||3,013,972||12.44%||2|
|BMO Dividend||Canadian Dividend and Income Equity||1.7||5,053,889||12.37%||3|
|GGOF Canadian Equity Fund Ltd. Mut||Canadian Equity||2.5||58,145||12.29%||2|
|PH&N Dividend Income-A||Canadian Dividend and Income Equity||1.1||2,584,403||12.15%||4|
|RBC Canadian Dividend||Canadian Dividend and Income Equity||1.7||9,633,758||12.00%||2|
|AGF Canada Class||Canadian Equity||2.9||109,547||11.84%||3|
|National Bank Canadian Index Plus||Canadian Equity||1.6||22,836||11.80%||1|
|PH&N Canadian Equity-A||Canadian Equity||1.1||1,037,817||11.78%||4|
|BMO Equity||Canadian Equity||2.3||2,004,093||11.53%||2|
|RBC Cdn Equity||Canadian Equity||2.0||4,930,970||11.53%||2|
|FÉRIQUE Equity||Canadian Equity||0.7||352,507||11.45%||3|
|Scotia Canadian Dividend||Canadian Dividend and Income Equity||1.7||2,375,539||11.44%||1|
© 2007 The Globe and Mail. All rights reserved.
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