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Mutual Fund News

A buy-and-hold strategy? It's not for everyone

swon@globeandmail.com

WHAT ARE WE LOOKING FOR?

Losers over a decade. When investing in mutual funds, we are always told to buy and hold for the long term. Let's see what funds have been mired in red ink.

TODAY'S SEARCH

We screened for funds, from all groups, losing money for the 10 years ended Oct. 31. Segregated , U.S. dollar and duplicate versions of funds were excluded.

WHAT DID WE FIND?

Many of the big losers are technology funds that got creamed when the Internet bubble burst in 2000. Or, they are Japanese equity funds invested in a market that has gone nowhere for years.

But it was the go-anywhere Mavrix Canadian Growth [formerly Mavrix Growth] that was the biggest loser - with an average annual loss of 20 per cent over 10 years.

Over 20 years, the $1.7-million fund has lost an annualized 7 per cent. What gives?

"I have to fix the performance," concedes Mavrix Fund Management president Malvin Spooner who took over the fund last March, and has $30,000 of his savings in it.

He previously ran the fund from 1996 to mid-2005. It has had a few strong years. The fund gained 59 per cent in 1999, but lost 66 per cent in 2001 amid the technology fallout. Colleague Roger Dent ran it from 2005 to this year. The fund rose 36 per cent in 2006, but shed 68 per cent in last year's meltdown.

But Mr. Spooner is no advocate of buy and hold. "Put money into a fund that is performing poorly," he says. "When it has made you some good money, move along."

What about the long term? "All bunk," he says. "If you take your money out, then the firm loses revenue [management fees]. ... Buy and hold makes sense from a business perspective."

So he was not aiming for a terrific long-term record?

"Exactly," he says. In fact, he suggests it might be a good idea to take some profits from sibling resource fund, Mavrix Explorer. It has gained a stunning 195 per cent this year as of Thursday.

Industry sectors and investment styles go in and out of favour, Mr. Spooner says. "I would suggest taking the winnings from the resource sector, and moving it into my or somebody else's growth fund... .

"In the last three months, Mavrix Canadian Growth is up 8.1 per cent. The tide should be turning now in the overall market in favour of growth as corporate profits and demand continue to improve in a modest interest rate environment. The trend should last only a couple of years though, at which time one should probably get conservative again."

Does he mean sell?

"Yes. Interest rates will rise, then peak. At that time, the bond and dividend-income style will begin to outperform as rates fall and income-paying securities rise in value."

***

Losers over 10 years ended Oct. 31, 2009
YTD
(As of Oct. 31)Latest% rtn% rtn (as of Oct. 31)
Fund nameCategory Assets ($-mil)MERNov. 301-yr3-yr5-yr10-yr15-yr20-yr
Mavrix Canadian GrowthCdn Sml/MdCp Equity1.73.484.9-23.2-27.2-11.3-19.5-10.2-7.2
CIBC Global TechnologySci. & Tech. Equity32.52.8732.515.5-5.7-1.8-11.1
VenGrowth Invst Fund Inc. Cl A SrERetail Venture Capital24.94.17-32.7-26.1-16.9-10.8
Renaissance Global Sci & TechSci. & Tech. Equity12.02.9031.915.0-4.7-1.4-10.5
Investors Japanese Equity-CJapanese Equity281.22.87-14.2-3.7-15.9-7.1-10.1-7.7-4.8
Altamira Science & TechnologySci. & Tech. Equity43.72.3519.06.4-3.6-1.4-9.8
TD Science & TechnologySci. & Tech. Equity89.92.6842.929.3-0.11.5-9.72.6
AGF Japan ClassJapanese Equity27.52.97-12.9-2.2-16.3-6.5-9.6-4.1-2.8
CI Glb Science & Technology Corp ClSci. & Tech. Equity94.62.3845.828.5-1.1-0.2-9.6
BMO Global Science and TechnologySci. & Tech. Equity39.82.4713.13.3-8.7-5.1-9.6
RBC Life Science & TechnologySci. & Tech. Equity86.72.1116.42.7-5.9-4.0-9.1
AIC Global AdvantageFinancial Svc. Equity32.02.8928.318.5-23.3-9.7-9.1
Ethical American Multi-StrategyU.S. Equity40.92.4713.51.2-8.5-2.6-8.92.73.3
Altamira US EquityU.S. Equity48.12.35-0.6-9.3-10.4-4.9-8.90.8
Investors Global Sci & Tech-CSci. & Tech. Equity153.72.8730.919.2-2.1-2.2-8.8
Scotia U.S. GrowthU.S. Equity30.52.56-3.9-11.9-12.7-6.5-8.6-0.72.2
Fidelity Global Technology-ASci. & Tech. Equity12.42.6529.817.9-3.70.5-8.5
AIC ValueU.S. Equity81.82.6011.0-4.5-21.4-10.7-8.20.7
Renaissance US Equity GrowthU.S. Equity6.42.6412.75.3-14.1-8.0-8.20.32.3
Fidelity Japan-AJapanese Equity6.52.64-3.40.3-14.4-4.9-8.1-2.9
BMO JapaneseJapanese Equity10.82.48-10.5-0.3-15.3-5.3-8.0-6.1
IG AGF U.S. Growth-CU.S. Equity155.33.1311.8-0.3-7.6-2.1-8.0
Investors U.S. Large Cap Growth-CU.S. Equity162.22.8723.08.8-5.9-2.1-7.9-2.60.8
AGF American Growth ClassU.S. Equity492.72.9312.2-0.6-7.7-2.0-7.63.24.7
MD American GrowthU.S. Equity222.91.5014.82.4-8.6-4.5-7.63.7
Mackenzie Univ US Growth LeadersU.S. Equity11.72.715.8-4.1-4.6-1.3-7.6
HSBC U.S. Equity-IU.S. Equity27.42.387.1-1.2-11.4-5.0-7.5
BMO U.S. GrowthU.S. Equity34.72.449.4-2.2-11.0-4.6-7.40.6
Fidelity Growth America-AU.S. Equity12.32.576.0-1.8-14.1-6.2-6.81.8
TD Japanese IndexJapanese Equity20.30.98-12.6-3.4-11.8-2.6-6.8
BMO Nesbitt Burns Cdn Small Cap Index64.348.0-4.55.38.98.07.6
NIKKEI 225 Total Return Index ($ Cdn)-5.212.6-8.7-0.7-7.2-5.5-4.4
NASDAQ Composite ($ Cdn)17.45.2-6.1-1.8-6.65.17.3
S&P 500 Composite ($ Cdn)4.7-5.3-10.3-4.1-5.73.85.3
S&P/TSX Composite Index27.411.8-4.04.24.26.45.3
Source: Globe Investor

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