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Mutual Fund News

Funds hoarding a mountain of cash

swon@globeandmail.com

WHAT ARE WE LOOKING FOR?

Nervous Nellies.

Some fund managers worry the recent rally is a bounce in a bear market. And they are hoarding cash to reduce risk, and keep their powder dry for better buying times.

The S&P/TSX Composite Index and the S&P 500 Index have swiftly climbed about 20 per cent from their depressing lows in early March.

TODAY'S SEARCH

Globefund analyst Tony Chan screened stock and balanced funds for those with the highest cash levels. The chart includes only firms that had submitted data for March 31. We excluded funds in the alternative strategies, retail venture capital and miscellaneous categories. We also left out duplicate and U.S. dollar funds.

WHAT DID WE FIND?

Piles of cash - up to 40 per cent. They can be found in everything from small- and large-company stock funds to various balanced and natural resource investments.

CIBC's Renaissance Millennium Next Generation, which is run by Leslie Williams, was sitting on 40-per-cent cash by quarter end. He does not believe Canadian equity markets have bottomed and are in a recovery trend. The fund's top holdings also include gold and silver investments such as Franco-Nevada Corp., SPDR Gold Shares, iShares COMEX Gold Trust and iShares Silver Trust.

AGF Canadian Balanced, run by Christine Hughes, has roughly a third of her fund in cash, equities and bonds. She has been bearish since 2007, and doesn't believe the rally is for real. "Bear markets, especially ones that come after a 25-year debt binge, don't wrap up in 12 months," she said.

AIC Dividend Income, AIC Canadian Focused and AIC Canadian Balanced - all managed by James Cole - have cash levels ranging from 32 per cent to 20 per cent. "This is clearly the worst recession since the early 1990s," Mr. Cole said. "We've had the big move off the bottom. I don't think stock markets are going to run away from me while I take time to make the right investment decisions."

AIC Canadian Focused is now 30 per cent in cash after selling stocks such as Suncor Inc. into the rally. "The best time to sell is not always the best time to buy," he said.

His fund was also sitting in 30-per-cent cash last August just before the market collapsed, but had reduced it to 10 per cent by year-end. While the fund still lost 27 per cent in 2008, it outperformed the broader Canadian market's 35-per-cent loss.

"You can put me in the same cautious camp," Mr. Cole said. "We've just seen one of the biggest increases in the history of stock markets ... in seven weeks. This period most resembles the early 1990s when the market bottomed. It was up for the first six months and then it spent two years going nowhere."

Fund cash positions at March 31, 2009

As of March 31, 2009
Net Assets% inYTD2008200720062005
Fund nameCategoryMER($-mil)Cash% rtn% rtn% rtn% rtn% rtn
Renaissance Millennium Next GenCdn Sm/Md Cap Equity2.5273.940.1-4.6-35.815.613.218.9
Stone & Co. Growth Industries ACdn Sm/Md Cap Equity3.570.539.68.8-55.3-2.14.35.5
Renaissance Millennium High IncomeCdn Sm/Md Cap Equity2.36495.338.2-5.4-31.55.32.924.6
AIC Dividend IncomeCdn Div & Incm Equity2.36129.032.2-0.9-27.0-4.77.520.2
AGF Canadian BalancedCdn Neutral Balanced2.511,200.829.61.5-7.43.114.912.6
AIC Canadian FocusedCdn Focused Equity2.42252.429.50.0-27.1-12.810.624.2
Middlefield Canadian Balanced ClassCdn Neutral Balanced2.677.228.70.5-22.34.34.026.2
Mackenzie Cundill Cdn Balanced 'C'Cdn Neutral Balanced2.351,061.028.3-6.8-17.6-0.26.68.4
CIBC Balanced IndexCdn Fixed Incm Balanced1.0426.526.7-2.1-13.82.610.710.7
Mackenzie Univ Canadian GrowthCdn Focused Equity2.35722.425.9-3.1-20.76.511.48.4
CI Signature High IncomeGlobal Neutral Balanced1.522,411.824.0-1.2-21.50.16.716.6
Compass Conservative PortfolioGlobal Fixed Incm Balanced1.4163.522.9-1.1-5.41.24.54.9
CI Harbour Growth & IncomeCdn Neutral Balanced2.316,622.722.8-0.3-19.73.811.217.3
United Intl Equity Diversif Pl-WInternational Equity0.2351.822.2-16.0-34.6-6.029.512.9
Mackenzie Univ Canadian BalancedCdn Neutral Balanced2.35497.021.5-2.2-12.17.18.37.8
Altamira Precision US Curr NeutralU.S. Equity0.5468.521.4-12.3-40.13.213.63.3
United Enhanced Income Pool-WGlobal Neutral Balanced0.2197.020.9-0.4-19.71.27.3
Renaissance Cdn. Asset AllocationTactical Balanced2.5695.320.3-2.2-26.82.28.910.3
CI Harbour Fgn Gr & Income Corp ClGlobal Eq Balanced2.36130.819.8-4.3-29.3-0.913.01.6
AIC Canadian BalancedCdn Neutral Balanced2.4693.219.70.0-18.6-9.77.718.2
National Bank Conservative DiversifCdn Fixed Incm Balanced1.7652.919.6-0.5-3.21.84.34.9
CI Signature Select CanadianCdn Focused Equity2.312,795.819.4-3.3-26.03.021.022.9
Credential Select Conservative PortGlobal Fixed Incm Balanced2.5516.619.0-0.1-11.8-2.29.33.7
CI Signature Global Energy Corp ClNatural Resources Equity2.35122.819.0-0.5-30.112.46.161.6
CI Signature Canadian ResourceNatural Resources Equity2.31451.718.94.7-29.618.928.149.8
CIBC Global EquityGlobal Equity2.7561.018.4-10.1-25.7-7.315.73.1
Credential Select Balanced Port.Global Neutral Balanced2.6575.618.4-1.2-19.3-1.211.26.6
Mackenzie Ivy European ClassEuropean Equity2.509.118.2-6.7-8.2-1.726.3-2.6
Mackenzie Cundill Recovery 'C'Global Small/Mid Cap Equity2.44765.817.7-5.6-53.827.123.320.3
CI Global Balanced Corporate ClassGlobal Equity Balanced2.37177.317.00.0-23.0-9.314.22.6
MSCI World (Cdn)-9.2-26.1-7.120.66.6
S&P 500-11.7-38.53.513.63.0
S&P/TSX Composite Index-3.0-35.07.214.521.9
BMO Nesbitt Burns Cdn Small Cap Index1.3-46.62.016.619.7
SOURCE: GLOBE INVESTOR

© 2007 The Globe and Mail. All rights reserved.

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