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Mutual Fund News

Year-end rally boosts small-cap funds

FUNDS REPORTER

Small was beautiful once again in December. Small- to mid-capitalization funds boasted the best average returns of all groups last month, fuelled by a year-end rally in their stocks.

The U.S. small- or mid-cap equity group gained an average of 5.5 per cent. Trimark U.S. Small Companies Class was at the top of this heap with a gain of 11.5 per cent.

Canadian small- or mid-cap funds rose an average of 5.3 per cent. Resolute Performance was the biggest gainer in this category with a robust 11.3-per-cent return.

The performance stems from a rebound in smaller company stocks that were hit from October to early December largely due to tax-loss selling, said technical analyst Don Vialoux.

That selling was "artificially dragging down prices," but created great opportunities for some investors, he said. "That is when [small caps] start to recover quite nicely."

The selloff is also the result some institutional investors getting rid of smaller-company stocks to buy more larger-company names that will look better when they release annual reports of holdings, he added.

This so-called small-cap effect can be seen in the performance of the small-cap Russell 200 Index of U.S. companies from Dec. 19 to March 7. The index has gained an average of 5.4 per cent in 23 out of the past 30 periods compared with 3.4 per cent for the larger-cap Russell 1000 Index, Mr. Vialoux noted.

***

How they fared

Top 5 Group Avg. 1 mo. Rtrn Group Avg. YTD
U.S. Small or Mid Cap Equity5.5%19.5%
Canadian Small or Mid Cap Equity5.3%52.0%
Science and Technology Equity5.3%36.6%
Canadian Income Trust Equity5.1%37.0%
Natural Resources Equity5.0%61.3%
Bottom 5
Global Fixed Income-3.0%-1.3%
Canadian Long Term Fixed Income-2.9%1.4%
Precious Metals Equity-2.6%71.5%
Canadian Fixed Income-1.3%6.2%
Canadian Short Term Fixed Income-0.7%3.2%
Avg. for all funds regardless of asset class 1.6% 19.2%
S&P 500 Composite Index1.8%23.5%
S&P/TSX Small Cap6.1%56.2%
S&P/TSX Total Return2.9%35.1%
Source: Globe Investor; All asset classes for December, 2009

© 2007 The Globe and Mail. All rights reserved.

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