WHAT ARE WE LOOKING FOR?
Global smaller-company funds with momentum.
Small- to mid-cap stocks tend to outperform early in an economic recovery. They are rebounding after being beaten up during a downturn like last year's market collapse. Unlike their larger peers, they don't have dividends to help support their stocks.
We checked the year-to-date returns for the best performers in the global small- to mid-equity-cap group until Nov. 20. U.S. dollar and duplicate versions of funds were excluded.
WHAT DID WE FIND?
There is no place like home.
Redwood Global Small Cap Fund was the leader, surging 110 per cent to Nov. 20. Its return is nearly double that of runner-up Mackenzie Cundill Recovery and its 60-per-cent return.
Looking under the hood of the Redwood global fund, we found stocks of Canadian-listed companies. So what gives?
"If you look at where the businesses are - as opposed to where the listing are - we are very global," said manager Michael Decter of LDIC Inc.
The assets of the firms in the fund are 60 per cent outside of North America, he said. "We like the protection of North American-listed companies because there is a more rigorous set of listing requirements."
The dominance of domestic-listed firms also stems from concerns about a strong loonie that could hurt returns when translated back into the Canadian dollar.
The value-oriented fund, which is 30 per cent invested in gold, energy and materials stocks, incorporates Mr. Decter's view of economic trends. While the fund now resembles a natural resource fund, "we could be in totally different industries in six months," he said. "With the U.S. dollar declining, there is a big movement particularly to gold and oil as a way of offsetting the dollar." He is upbeat on prices for gold and oil for at least the next two to three quarters. "At some point, this will reverse, and we would expect to hopefully be on the sidelines on gold and oil."
Big winners in the portfolio include Mercator Minerals Ltd., a molybdenum play, and zinc producer Breakwater Resources Ltd. Both are no longer in his portfolio. He still holds another major mover, Alliance Grain Traders Income Fund, a Canadian exporter of pulse crops like lentils.
The rebounding Asian economy should drive oil and base metals prices higher, he said. "The whole base metals complex is going to do very well because you have had the prices go up based largely on the stimulus in China. But we are now seeing the stimulus in North America start to work its way through the infrastructure spends."
|Global Small/Mid Cap Equity Funds as of Nov. 20|
|Assets||Latest||Nov. 20||Oct. 31||Calendar returns %|
|Name||Millions $||MER %||YTD %||YTD %||2008||2007||2006||2005||2004||2003|
|Redwood Global Small Cap||3.5||2.18||110.3||100.0||n/a||n/a||n/a||n/a||n/a||n/a|
|Mackenzie Cundill Recovery 'C'||1316.4||2.48||60.1||57.5||-53.8||27.3||23.3||20.3||11.3||55.1|
|Webb Enhanced Growth||4.5||n/a||54.2||47.4|
|Tmpltn Global Smaller Co||577.7||2.69||50.6||47.4||-38.8||-7.4||24.8||-2.3||10.8||30.5|
|Trimark Global Small Co Class A||22.4||2.46||47.1||41.5||-37.8||n/a||n/a||n/a||n/a||n/a|
|Brandes Global Small Cap Equity||144.6||2.57||41.9||41.5||-37.6||-29.7||6.7||1.3||12.2||36.5|
|Mawer Global Small Cap||12.8||2.35||39.9||38.5||-29.9||n/a||n/a||n/a||n/a||n/a|
|Manulife Mawer Global Small Cap||30.7||2.70||39.6||37.7||n/a||n/a||n/a||n/a||n/a||n/a|
|Quadrus US & Intl Specialty Class||26.9||2.97||37.2||32.8||-36.6||-2.2||15.8||n/a||n/a||n/a|
|Dynamic Pwr Global Navigator Cl||8.1||2.79||35.1||27.6||n/a||n/a||n/a||n/a||n/a||n/a|
|Counsel Global Small Cap-A||4.3||2.81||34.0||29.7||-35.6||-7.5||19.9||n/a||n/a||n/a|
|Trimark Glo Mid-Cap Equ Private Pl||38.1||2.13||29.8||27.8||-36.4||-15.9||n/a||n/a||n/a||n/a|
|Altamira Global Small Co.||43.8||2.83||29.7||26.7||-32.1||-9.9||19.1||12.6||16.1||27.5|
|Trimark Global Endeavour||723.8||2.49||29.1||27.2||-36.7||-15.7||29.0||5.3||21.2||9.0|
|Investors Summa Glo Environ||12.9||2.84||26.7||22.5||-50.7||n/a||n/a||n/a||n/a||n/a|
|Mackenzie Saxon Glo Small Cap SI||0.4||2.34||22.8||22.1||-32.3||n/a||n/a||n/a||n/a||n/a|
|BMO Sustainable Climate Class||3.6||n/a||21.6||15.4||n/a||n/a||n/a||n/a||n/a||n/a|
|Mackenzie Cundill Global Div-T5||67.4||2.45||19.4||16.5||-39.5||-13.8||20.3||6.2||1.8||5.2|
|BMO GDN Glbl Small Cap Classic||0.7||2.25||18.7||14.8||-40.6||-10.5||19.8||17.0||14.2||30.0|
|Mackenzie Saxon Int Equity SI||16.8||2.27||18.3||18.0||-36.4||-9.3||25.6|
|Renaissance Global Small Cap||12.1||2.92||17.3||16.6||-33.4||-12.7||15.5||7.2||12.9||20.5|
|Desjardins Global Small Cap Equity||194.5||2.52||15.3||13.0||n/a||n/a||n/a||n/a||n/a||n/a|
|Norrep G Class-A||n/a||n/a||13.6||9.8||-34.9||-9.4||n/a||n/a||n/a||n/a|
|CI Global Small Companies||185.1||2.33||13.5||11.3||-25.3||-6.3||23.7||7.5||9.4||22.8|
|NexGen Global Value-CG||0.5||1.60||10.7||8.9||-30.4||n/a||n/a||n/a||n/a||n/a|
|Scotia Global Small Cap||2.2||2.77||9.0||6.6||-41.4||-11.8||16.7||13.5||5.5||16.4|
|IA Clarington Global Small Cap||26.8||2.90||6.1||3.3||-27.2||-1.7||19.9||15.5||13.3||21.1|
|Mackenzie Saxon World Fund-SI||192.1||2.02||4.1||1.8||-22.2||-21.2||18.4||3.5||8.9||25.1|
|MSCI World ($ Cdn)||8.5||-26.1||-7.1||20.6||6.6||7.3||9.4|
|S&P/TSX Completion Total Return||40.3||33.3||-38.8||5.8||13.7||22.0||22.3||28.6|
|S&P/TSX Composite Index||28.8||21.4||-35.0||7.2||14.5||21.9||12.5||24.3|
|Source: Globe Investor|
© 2007 The Globe and Mail. All rights reserved.
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