For many mutual fund investors, it has been a year of pain.
The market collapse of 2008 has wiped out a big chunk of wealth in stock funds.
It didn't matter whether investors had money in a plain vanilla Canadian equity fund, or more exotic global or resource funds. And some funds got pummelled more than others.
Among the 30 biggest stock funds sold in Canada, the losses ranged from 46.5 per cent for Sprott Canadian Equity to 18.4 per cent for Mackenzie Ivy Canadian, according to year-to-date returns to Dec. 19.
Of the 18 Canadian stock funds, two-thirds beat the S&P/TSX composite index's 38.2-per-cent loss.
The returns of the index-beaters prove that "active management in bear markets tends to outperform," independent fund analyst Peter Loach said in an interview.
"Unfortunately, investors are not as elated with relative returns when they are negative. ... But it does support the argument that active management adds value."
Among the big losers was Sprott Canadian Equity, a go-anywhere Canadian equity fund that falls in the natural resource category in Globefund because of its stock focus.
While it still has an impressive 10-year record, its recent 46.5-per-cent loss stems from a focus on smaller company resource stocks that have been shellacked, and a big holding in gold and silver bullion.
TD Canadian Equity, which had outperformed the S&P/TSX composite earlier this year in a rising market, also lagged the benchmark with a loss of nearly 45 per cent.
"In Canada, because the market is so narrow when it comes to sectors, the very large funds have no choice but to be plus or minus each sector," Mr. Loach said. "A lot of them are really closet indexers."
Jerry Javasky's Mackenzie Ivy Canadian Fund, which had been a laggard in recent years because it ignored the booming resource sector, appears to be having its day in the sun again. It lost the least among the giant funds -18.4 per cent for the year to Dec. 19.
While that fund historically had a big cash position, that is not the big reason for shedding less red ink. The fund had 2.4 per cent in cash at the end of November.
"We invest in businesses that tend to be less economically sensitive ... so the earnings of most of our holdings have continued to chug along at a pretty good rate," said Paul Musson, a co-manager on the Mackenzie Ivy family of funds.
Some of the names in Mackenzie Ivy Canadian include Shoppers Drug Mart Corp., Canadian National Railway Co., Enbridge Inc., Tim Hortons Inc., Loblaw Cos. Ltd. and Thomson Reuters.
While some cash has gone to redemptions, other money has been invested in companies that have been on the radar screen "literally for years" but were once considered too expensive, Mr. Musson said.
Other Canadian stock funds that have beaten the index include Mackenzie Cundill Security, which lost 26.4 per cent; CI Harbour, off 27.1 per cent; and CI Signature Select Canadian, down 28 per cent.
All these funds with less red ink, however, are Canadian-focused equity funds. That means they can have nearly 49 per cent in foreign stocks if they wish and avoid the resource-heavy Canadian market.
Meanwhile, some of the giant global value funds, like AGF Global Value and Brandes Global Equity, were spanked pretty hard, respectively losing 36.7 and 33.4 per cent.
These kinds of funds "got caught in a value trap earlier in the year," Mr. Loach suggested. "Global financials did look cheap based on the metrics that they tend to use ... but they just kept getting cheaper."
The problem in this downturn is that there have been "few places to hide in the stock market - whether in Canada or elsewhere," said independent fund analyst Dan Hallett.
In the bear market that began in 2000, "you could have done well in anything that wasn't in technology," Mr. Hallett recalled.
"If you were in stock funds this year, it would have been tough to avoid losing money. Currency had nothing to do with it this year, although it was better to be unhedged [in foreign funds]."
The only way to offset the losses was to have had some cash or government bonds, Mr. Hallett noted. "It just reinforces the notion that, for the vast majority of people, they shouldn't be 100 per cent in stocks."
Largest 30 Equity Funds by Assets To Date (Dec 19. 2008)
|(as of||(as of|
|(as of Nov. '08)||Dec. 19)||Nov. 30)|
|Fund name||Category||Assets ($-mil)||YTD % rtn||10-yr % rtn|
|Sprott Canadian Equity||Natural Res.||1,112.0||-46.5||24.2|
|TD Canadian Equity||Cdn||1,911.4||-44.9||6.7|
|Investors Canadian Equity-C||Cdn Focused||1,972.9||-42.4||3.1|
|RBC O'Shaughnessy Cdn Equity||Cdn Focused||1,110.7||-41.0||7.4|
|SEI Canadian Equity-O||Cdn||1,699.7||-39.1||8.8|
|Investors Cdn Large Cap Value-C||Cdn Focused||1,948.5||-38.1||5.1|
|Fidelity True North-B||Cdn||1,519.9||-37.5||7.2|
|AGF Global Value||Global||1,409.8||-36.7||-1.4|
|RBC Cdn Equity||Cdn||3,359.6||-36.6||6.0|
|RBC European Equity||European||1,179.4||-36.5||-3.2|
|iShares CDN LargeCap 60 Index||Cdn||7,687.9||-34.9||n/a|
|AGF Cdn Large Cap Div-Classic||Cdn Focused||2,222.6||-34.3||4.4|
|Brandes Global Equity||Global||1,939.5||-33.4||n/a|
|AGF Canadian Stock||Cdn Focused||1,559.3||-33.2||n/a|
|MD Equity||Cdn Focused||1,635.5||-31.3||5.6|
|CI Canadian Investment||Cdn Focused||3,790.4||-30.3||7.1|
|Templeton Growth Fund Ltd.||Global||2,221.6||-30.3||-0.8|
|Trimark Select Growth||Global||2,626.8||-29.1||1.2|
|Trimark Select Canadian Growth||Cdn Focused||2,004.7||-28.6||5.3|
|CI Signature Select Canadian||Cdn Focused||2,879.2||-28.0||10.7|
|RBC U.S. Equity||U.S. Sml/Md Cp||2,292.4||-27.9||-2.7|
|Mackenzie Cundill Value 'C'||Global||4,596.3||-27.7||6.4|
|CI Harbour||Cdn Focused||4,284.9||-27.1||8.0|
|Mackenzie Cundill Cdn Security 'C'||Cdn Focused||1,405.8||-26.4||5.1|
|Investors U.S. Large Cap Value-C||U.S.||1,798.7||-21.1||-1.4|
|Mackenzie Ivy Canadian||Cdn Focused||2,118.2||-18.4||3.0|
|S&P 500 composite||-39.5||-2.6|
|MSCI World ($ Cdn)||-2.1|
|S&P/TSX composite index||-38.2||3.9|
Excludes segregated and pooled funds
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