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Mutual Fund News

When star funds falter, it's time to buy

rcarrick@globeandmail.com

What We're Looking For

Popular mutual funds that have excellent long-term records, but haven't done so well recently. In other words, opportunities to buy low.

Today's Screen

An excellent long-term record is defined here as meaning a 10-year compound average annual return that ranks in the first quartile. Quartiles divide funds in a category into four groups according to their returns, and the first quartile is the best place to be.

To find lagging funds, we narrowed our list by keeping only funds that rank in the third or fourth quartile for the most recent 12 months. Finally, we ranked the funds from the largest on down, as measured by their assets.

What We Found

The stock markets have rebounded smartly, but not all funds have fully participated. This presents an opportunity in the case of funds such as RBC Dividend, which stacks up well against other dividend funds over the long term.

What, you prefer to deal with Bank of Montreal, Bank of Nova Scotia or Toronto-Dominion Bank? Their dividend funds are also on this list of long-term studs that have lagged at least a little bit in the 12 months to July 31.

Sprott Canadian Equity's 10-year average annual return of 22 per cent certainly stands out, but so does the fund's one-year drop of 39 per cent. The fund is now in the fourth quartile for its category, which raises the question of what happened the last time this fund was in the basement. That was in 2005; the next year, the fund was back to first quartile.

Don't procrastinate if you're looking at any funds on this list of laggards. Some have been on a tear lately, which means the opportunity to buy them at a low point is disappearing.

Fallen Stars - (ranked by largest assets)
(As of July 31/09)Latest% return (as of July 31)
Fund nameCategory Assets ($-mil)MER1-yr10-yr
RBC Canadian DividendCanadian Dividend and Income Equity8,986.91.70-10.1%9.1%
CIBC Monthly IncomeCanadian Neutral Balanced5,849.91.41-8.5%7.8%
RBC Select BalancedGlobal Neutral Balanced4,814.21.85-8.3%3.3%
BMO DividendCanadian Dividend and Income Equity4,019.91.71-10.2%8.8%
TD Dividend Income-ICanadian Equity Balanced3,066.71.92-9.1%7.8%
TD Dividend GrowthCanadian Dividend and Income Equity2,933.11.92-10.2%9.6%
CI Signature High IncomeGlobal Neutral Balanced2,864.41.52-10.3%8.9%
TD Canadian EquityCanadian Focused Equity2,469.62.07-28.4%6.5%
SEI Canadian Equity-OCanadian Equity2,251.00.13-19.4%9.5%
Scotia Canadian DividendCanadian Dividend and Income Equity2,079.31.64-13.6%8.2%
Dynamic Power Canadian GrowthCanadian Focused Equity1,557.34.09-31.7%9.8%
Fidelity Canadian Balanced-ACanadian Neutral Balanced1,292.62.22-6.6%7.3%
Dynamic Power BalancedCanadian Neutral Balanced1,274.72.99-10.3%8.6%
Trimark Fund-SCGlobal Equity1,225.81.60-21.4%1.4%
MD DividendCanadian Equity Balanced1,197.21.44-8.7%6.4%
Sprott Canadian EquityNatural Resources Equity1,184.02.81-39.3%22.0%
Dynamic FocusPlus BalancedCanadian Neutral Balanced1,167.52.37-8.8%7.0%
National Bank MortgageCanadian Short Term Fixed Income1,154.91.674.1%4.9%
National Bank DividendCanadian Fixed Income Balanced1,128.91.71-6.4%5.7%
RBC O'Shaughnessy Canadian EquityCanadian Focused Equity1,096.11.47-25.0%7.7%
RBC North American GrowthCanadian Focused Equity1,087.11.99-21.0%6.8%
CI Synergy Canadian Corporate ClassCanadian Focused Equity1,041.32.31-19.8%6.6%
Acuity High IncomeCanadian Equity Balanced993.12.37-10.5%8.4%
AIM Canadian BalancedCanadian Neutral Balanced932.52.35-7.2%6.0%
Dynamic Canadian Dividend FundCanadian Focused Equity918.62.43-21.3%7.4%
Primerica GrowthGlobal Equity Balanced897.62.51-13.3%4.0%
Dynamic Value BalancedGlobal Neutral Balanced885.82.38-9.2%8.0%
Integra DiversifiedCanadian Neutral Balanced862.90.86-7.6%5.3%
RBC O'Shaughnessy U.S. ValueU.S. Equity738.01.47-29.0%-0.1%
Source: Globe Investor

© 2007 The Globe and Mail. All rights reserved.

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