TORONTO -- INVESTMENT FUNDS REPORTER
Many mutual funds turned heads last year as they posted double- or triple-digit gains amid rebounding markets.
But global fund data and analysis provider Lipper Inc. handed out awards last night to managers who racked up stronger three-year returns with lower risk than their peers.
"It's probably the best yardstick that we could come up with that separates good managers from lucky managers," said Jeff Tjornehoj, research manager at the Lipper unit of Thomson Reuters Corp.
"In most cases, it was a fantastic rebound from a disastrous 2008," he said. "A lucky manager can come up with triple-digit returns in a good market, but can they come up with good returns in a difficult market? And risk-adjusted returns give us an indication of how far out on a limb a manager goes to generate returns."
Strong risk-adjusted returns refers to getting more return per unit of risk or volatility. "We evaluate risk through the choppiness of returns," he said. "The more choppiness, the more risk we believe is involved in owning that fund."
Lipper gives out awards for performance over one-, three-, five-, and 10-year periods as compared with others in their peer groups and typically highlights the three-year winners. "People tend to look at three years globally as a better indicator of recent performance than one year," Mr. Tjornehoj said.
Templeton Global Smaller Companies Fund, which posted an average annual loss of 5 per cent over three years, won in the global small-mid cap equity category. It beat the average annual loss of 8.3 per cent by the MSCI World Small Cap Index on a total return basis, adjusted for Canadian dollars.
Fund manager Bradley Radin, who has run the fund since 1999, looks for bargain-basement stocks and holds them for the long term. "One of the big things that we did over the past three years is buy a lot of consumer stocks during the meltdown in late 2008 and early 2009," the Franklin Templeton Investments manager said. "The fund was 40-per-cent invested in consumer discretionary stocks by the bottom."
"They got sold down to ridiculous and cheap levels because the short term outlook looked terrible.... But, many of those companies have really bounced back quite nicely as some of the worries unwind."
Brandon Snow runs Fidelity Canadian Large Cap Fund, a three-year winner in the Canadian focused-equity category that allows up to 50 per cent to be invested in foreign stocks. He took over in January, 2009, from Doug Lober. The fund gained 37 per cent for the year ending Dec. 31, 2009. Over three years, it has posted an average annual return of 3 per cent over three years versus 0.21 per cent for the S&P/TSX total return index.
Mr. Snow is more focused on reducing risk. He ferrets out stocks of firms with a strong business model and management in a solid and stable industry. And he holds the stocks for two to three years.
"In the first two years, a lot of the performance was driven by the commodity space and owning the right names in the commodities," he said.
"However, in the last year when you look at my performance attribution, it has been pretty well across all industries and pretty well driven by stock picking than taking a rather large bet on an industry."
Lipper, based in the U.S., handed out awards for performance over three years in various categories. Invesco Trimark took top honours for the equity group, and Fidelity Investments Canada won for the balanced fund category. Phillips Hager & North, part of RBC Global Asset Management, won for the bond fund category, and also the "overall" award encompassing bond, equity and balanced funds.
"I just can't imagine a more difficult operating climate that we managed in 2008 and 2009," said Dan Chornous, chief investment officer of RBC Global Asset Management. "Specifically, we saw great potential in the corporate bond markets ... so our clients took full advantage of the massive recovery in credit prices through the second half of the year," he said. "In the equity markets, our investment managers recognized that prices had fallen far below levels that reflected sustainable earnings power."
Being a Lipper award winner in any one year is no guarantee of success the next year. AGF Canadian Balanced won the three- and five-year Lipper awards in 2008 for the Canadian equity balanced group, but it doesn't show up among winners for 2009.
"It is tough to repeat year in and year out," Mr. Tjornehoj said. "It's like your favourite NHL player going to the all-star game one year, but not being named the next. He might still be a very good player, but he just didn't have all of the intangibles in place to make another run."
Group award winners
Best Mixed Assets Fund Group:
Best Equity Fund Group:
Best Bond Fund Group:
Phillips Hager & North
Best Fund Group Overall:
Phillips Hager & North
Source: Lipper Inc.
|Fund company||Fund name||Fund class|
|AGF Investments Inc.||AGF Emerging Markets||Emerging Markets Equity|
|Beutel, Goodman & Company Ltd||Beutel Goodman Income||Canadian Fixed Income|
|Caldwell Investment Management Ltd.||Caldwell Exchange||Miscellaneous|
|CI Investments Inc||United-Institutional Managed Income Pool Class W||Canadian Fixed Income Balanced|
|CIBC Asset Management||CIBC European Equity||European Equity|
|CIBC Asset Management||CIBC Nasdaq Index||US Equity|
|Desjardins Global Asset Management Inc||Desjardins Environment||Canadian Equity|
|Goodman and Company, Investment Counsel||Dynamic Power Small Cap Fund||Canadian Focused Small/Mid Cap Equity|
|Goodman and Company, Investment Counsel||Dynamic Marquis Equity Portfolio||Global Equity|
|Invesco Trimark||Trimark Canadian Resources||Natural Resources Equity|
|Matthews International Capital Management LLC||BMO Guardian Asian Growth & Income||Asia Pacific Equity|
|Mawer Investment Management Ltd.||Mawer Canadian Diversified Investment||Global Equity Balanced|
|Mawer Investment Management Ltd.||Mawer Canadian Balanced Retirement Savings||Global Neutral Balanced|
|Mawer Investment Management Ltd.||Mawer World Investment||International Equity|
|MFC Global Investment Management||Manulife Strategic Income Fund Series E||Global Fixed Income|
|National Bank||National Bank Monthly Moderate Income||Canadian Neutral Balanced|
|Phillips, Hager & North Inv. Mgmt. Ltd.||Phillips, Hager & North Short-Term Bond & Mtg D||Canadian Short Term Fixed Income|
|Phillips, Hager & North Inv. Mgmt. Ltd.||Phillips, Hager & North High Yield Bond D||High Yield Fixed Income|
|Pyramis Global Advisors LLC (Fidelity)||Fidelity Dividend Series A||Canadian Dividend & Equity Income|
|Pyramis Global Advisors LLC (Fidelity)||Fidelity Monthly High Income Series A||Canadian Equity Balanced|
|Pyramis Global Advisors LLC (Fidelity)||Fidelity Canadian Large Cap Series A||Canadian Focused Equity|
|Pyramis Global Advisors LLC (Fidelity)||Fidelity Income Trust Series A||Canadian Income Trust Equity|
|RCM Capital Management LLC||BMO Guardian Global Technology Classic||Science & Technology Equity|
|Sentry Select Capital Inc.||Sentry Select Small Cap Income A||Canadian Small/Mid Cap Equity|
|Sentry Select Capital Inc.||Sentry Select Precious Metals Growth||Precious Metals Equity|
|T Rowe Price Associates, Inc||TD US Mid-Cap Growth Investor Series||US Small/Mid Cap Equity|
|Templeton Investment Management||Templeton Global Smaller Companies A||Global Small/Mid Cap Equity|
|Source: Lipper Inc.|
© 2007 The Globe and Mail. All rights reserved.
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