WHAT ARE WE LOOKING FOR?
How the mutual fund stars of 2007 fared in 2008.
For novice investors, there is a tendency to chase performance. The stellar returns of yesterday can be alluring as a guide to future performance.
We screened for the top 30 performers in 2007, and compared their performance with last year. Segregated, pooled, U.S. dollar, duplicate, and retail venture capital funds were excluded, along with hedge funds.
We also added the annual returns back to the bear market years of 2001 and 2002 to give some perspective.
WHAT DID WE TURN UP?
The robust returns of the 2007 stars evaporated entirely in almost all cases in last year's market downturn. Some funds were also bleeding a lot more than what investors probably expected.
Dynamic Power American Currency Neutral Fund was at the top of the heap in 2007 with a spectacular 47.4-per-cent return helped by a rising Canadian dollar.
But the fund, run by Noah Blackstein, lost that gain and more when it shed 57.2 per cent in 2008. The growth fund got whacked - not only by the market downturn - but also the falling loonie.
His Dynamic Power Global Growth Class, which gained a stellar 45 per cent in 2007, shed 47.2 per cent last year.
Investors, who put money into Peter Hodson's Sprott Growth Fund after its eye-popping 35.1-per-cent gain in 2007, were disappointed. That fund lost 62.6 per cent in 2008.
Similarly, AGF Aggressive U.S. Growth, which is run by Chicago-based Driehaus Investment Management LLC, garnered a spectacular 40.8-per cent return in 2007 only to lose 36.1 per cent of that the next year.
Still, investors, who had jumped into this AGF fund after it lost money in the 2001 and 2002 bear markets, would have had a cumulative gain of 78.6 per cent before losing half of it last year. They would still be in the black after six years.
If there are lessons in these numbers, it's that chasing high fliers can be dangerous.
While it may be a hard to stomach, a better time to buy is when a fund has been battered in a down market - not after spectacular results.
No one has a crystal ball as to when there will be a rebound, but the odds are that - if the manager is an astute stock picker - you will be eventually be rewarded.
Just don't get greedy in the next round. Avoid rear-end load funds so you can take profits off the table without a penalty before the inevitable downturn again. Nothing goes up forever.
2008 Returns for Mutual Fund Stars of 2007
|(as of Dec. '08)||Latest||% Return|
|Fund name||Category||Assets ($-mil)||MER*||2008||2007||2006||2005||2004||2003||2002||2001|
|Dynamic Power Am Currency Neutral||U.S. Equity||15.4||5.73||-57.2||47.4||-2.5|
|Dynamic Power Global Gwth Cl||Global Equity||164.7||3.82||-47.2||45.0||11.4||15.6||17.1||20.3||-21.8|
|AGF Aggressive U.S. Growth||U.S. Sml/MdCap Eq||218.0||2.51||-36.1||40.8||4.2||4.7||11.0||17.9||-30.0||-38.0|
|Excel China||Greater China Eq||69.9||2.39||-45.9||39.5||83.2||-6.0||-4.4|
|Fidelity China A||Greater China Eq||29.8||2.68||-37.6||39.3|
|BMO Greater China Class||Greater China Eq||84.8||2.73||-47.5||38.2||47.4||-0.3|
|Tmpltn BRIC CC||Emerging Mrkts Eq||184.5||2.94||-49.0||35.7||51.0|
|Sprott Growth||Cdn Foc. Sml/MdCp Eq||89.0||5.79||-62.6||35.1|
|Fidelity Global Natural Resources-A||Natural Res. Equity||18.0||2.71||-36.2||35.0||8.4||31.6||9.3||8.7||-13.7||-8.1|
|HSBC Chinese Equity-I||Greater China Eq||165.3||2.55||-43.4||35.0||80.3||7.2|
|RBC Global Resources||Natural Res.Equity||153.9||2.16||-49.5||33.4||48.1||36.7||17.2||26.9||2.6||0.7|
|National Bank Quebec Growth||Cdn. Sml/MdCap Eq||9.7||2.36||-45.4||32.3||19.1||1.6||18.4||29.0||-10.2||14.4|
|Mackenzie Univ Wld Resource Class||Natural Res. Equity||79.9||2.46||-62.1||32.3||23.6||27.3||22.8||30.3||6.4||22.0|
|AGF China Focus Class||Greater China Eq||238.0||2.96||-41.7||30.5||67.6||8.6||-9.3||63.4||-11.0||20.8|
|Acuity Clean Environment Equity||Cdn Foc. Sml/MdCp Eq||70.3||2.85||-52.7||30.3||7.7||16.2||11.4||35.9||-25.2||-13.4|
|Dynamic Power American Growth||U.S. Equity||142.5||5.10||-44.1||30.0||-1.5||21.5||14.5||11.9||-28.6||-19.4|
|iShares CDN Materials Sector Index||Natural Res.Equity||166.3||0.55||-26.8||29.5||48.4|
|Investors Greater China C||Greater China Eq||124.6||2.91||-39.0||29.5|
|Renaissance China Plus||Greater China Eq||89.3||3.21||-37.0||28.6||51.8||-3.2||-5.0||40.5||-21.7||4.0|
|Mackenzie Cundill Recovery 'C'||Global Sml/MdCap Eq||864.7||2.44||-53.8||27.1||23.3||20.3||11.3||55.1||1.7||6.6|
|Mackenzie Univ Health Sci Class||Health Care Eq||44.9||2.41||-23.3||25.7||6.2||2.7||-3.1||-2.9||-19.2||-12.9|
|Dynamic Power Canadian Growth||Cdn Focused Eq||918.6||4.09||-51.4||25.4||25.6||28.4||16.7||35.6||-6.2||-13.2|
|Mackenzie Univ Canadian Resource||Natural Res. Equity||776.2||2.40||-56.2||24.7||18.3||35.5||21.1||43.8||27.0||22.8|
|Manulife China Opportunities Class||Greater China Eq||61.0||2.88||-39.3||24.2||72.9||8.8|
|BMO Special Equity||Cdn Sml/Md Cap Eq||201.7||2.39||-47.6||23.8||20.4||23.0||20.9||19.6||-2.4||0.6|
|imaxx Canadian Equity Growth||Canadian Equity||15.8||2.68||-40.3||23.6||19.5||14.2||23.2||34.5|
|Investors Glo Natural Resource Cl-A||Natural Res. Equity||156.4||2.86||-44.4||23.5||33.2||38.2||17.8||18.3|
|MSCI World ($ Cdn)||-26.1||-7.1||20.6||6.6||7.3||9.4||-20.2||-11.4|
|S&P 500 index||-38.5||3.5||13.6||3.0||9.0||26.4||-23.4||-13.0|
|S&P/TSX composite index||-35.0||7.2||14.5||21.9||12.5||24.3||-14.0||-13.9|
|S&P/TSX Small Cap||-47.9||-2.9||6.7||8.9||5.8||33.0||-4.3||3.2|
*MERs may include performance fees in some instances.
© 2007 The Globe and Mail. All rights reserved.
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