WHAT ARE WE LOOKING FOR?
Exchange-traded funds (ETFs) with the most zip in the first quarter.
These low-fee funds, which can be bought and sold like stocks, can be an easy way to gain exposure to a hot sector.
We screened for the top 25 best performers for the first three months of this year among Canadian-listed ETFs. They include iShares, Claymore, BMO and Horizons AlphaPro ETFs. We excluded the leveraged Horizons BetaPro bull and bear and inverse (short) ETFs.
WHAT DID WE FIND?
Small-cap and financial ETFs were among the standouts.
The iShares CDN Russell 2000 ETF, which tracks the Russell 2000 index of U.S. small-cap stocks, posted an 8.7-per-cent gain - the highest return among those screened.
Small-cap stocks tend to outperform in the early stages of an economic recovery as the size of their companies makes them more nimble and able to act when conditions improve.
If the currency risk from a strengthening Canadian dollar had not been hedged, this ETF would have gained only 5.7 per cent, said Stephen Leong, vice-president of product development at iShares Canada.
Canadian financial ETFs also fared well. Fiscal first-quarter profit for most of the big Canadian banks beat analysts' expectations, while "strong GDP [gross domestic product] numbers coming out of Canada have also been a driver of stock market performance," Mr. Leong added.
Both BMO S&P/TSX Equal Weight Banks ETF and the Claymore Equal Weight Banc & Lifeco ETF posted an 8.3-per-cent return. The iShares CDN Financial Sector Index, which also includes mutual fund companies, rose 7.9 per cent.
Among the leaders, the Horizons AlphaPro Seasonal Rotation ETF gained 3.9 per cent. This actively managed ETF uses other ETFs to invest in different sectors during times of seasonal strength.
This ETF, which is advised by Don Vialoux who runs timingthemarket.ca, and Brooke Thackray, author of Thackray's 2010 Investor's Guide, does not have an equity benchmark. It targets a 5-per-cent annualized return.
Some of this ETF's performance came from Retail HOLDRs ETF, iShares CDN S&P/TSX Capped Energy ETF, and iShares Russell 2000 ETF, Mr. Vialoux said.
He prefers the U.S.-listed iShares Russell 2000 ETF instead of its hedged Canadian counterpart. "If you are dealing with any kind of size, the iShares ETF in Canada doesn't give you the liquidity you need to put on a sizable position so we chose to do it directly through the United States."
|Leaders among ETFs in the first quarter|
|(As of Mar. 31)||Latest||(Mar. 31)||Calendar year % rtn|
|Name||Symbol||Category Assets ($-mil)||MER||YTD % rtn||2009||2008||2007|
|iShares CDN Russell 2000 Index||XSU-T||U.S. Sml/Md Cap Equity||49.1||0.35||8.7||24.5||-38.8|
|BMO S&P/TSX EW Banks Index ETF||ZEB-T||Financial Services Equity||16.7||8.3|
|Claymore Japan Index ETF C$ Hedged||CJP-T||Japanese Equity||27.5||0.68||8.3||1.9||-46.7|
|Claymore Equal Wght Banc&Lifeco ETF||CEW-T||Financial Services Equity||0.59||8.3||46.4||-36.8|
|Claymore US Fundamental Index ETF||CLU-T||U.S. Equity||104.8||0.62||8.1||28.5||-42.6||-2.9|
|iShares CDN Financial Sector Index||XFN-T||Financial Services Equity||1070.1||0.55||7.9||44.2||-35.8||-1.3|
|iShares CDN Value Index||XCV-T||Cdn. Div. & Income Equity||49.5||0.50||7.5||43.7||-34.0||5.8|
|iShares CDN Income Trust Sector Idx||XTR-T||Cdn. Income Trust Equity||239.1||0.55||6.5||40.4||-25.9||6.0|
|iShares CDN Tech Sector Index||XIT-T||Science & Tech. Equity||60.4||0.55||6.0||52.4||-49.1||10.7|
|iShares CDN Dividend Index||XDV-T||Cdn. Div. & Income Equity||630.1||0.50||5.9||36.8||-30.9||-0.8|
|Claymore Cdn Fundamental Index ETF||CRQ-T||Canadian Equity||0.60||5.5||44.3||-31.6||7.3|
|iShares CDN S&P 500 Index||XSP-T||U.S. Equity||1410.7||0.24||5.1||22.9||-40.3||3.2|
|iShares CDN Completion Index||XMD-T||Canadian Equity||170.8||0.55||5.1||46.4||-38.8||5.3|
|Claymore US Fund Index ETFnonhedged||CLU.C-T||U.S. Equity||4.4||0.70||4.9|
|iShares CDN SmallCap Index||XCS-T||Cdn. Sml/Md Cap Equity||108.6||0.55||4.8||61.1||-45.4|
|BMO S&P/TSX EW Gbl Base Metals ETF||ZMT-T||Natural Resources Equity||18.4||4.7|
|BMO Dow Jones Industrial Avg CA ETF||ZDJ-T||U.S. Equity||4.3||4.4|
|BMO US Equity ETF||ZUE-T||U.S. Equity||11.6||4.2|
|iShares CDN MSCI EAFE Index||XIN-T||International Equity||1107.4||0.49||4.1||18.1||-40.6||1.9|
|iShares CDN Jantzi Social Index||XEN-T||Canadian Equity||22.5||0.50||4.0||38.9||-35.5|
|HAP Seasonal Rotation ETF||HAC-T||Alternative Strategies||3.9|
|BMO International Equity Index ETF||ZDM-T||International Equity||11.2||3.7|
|BMO High Yield US Corp Bond ETF||ZHY-T||High Yield Fixed Income||23.7||3.7|
|Claymore S&P/TSX Cdn Dividend ETF||CDZ-T||Cdn. Div. & Income Equity||250.8||0.64||3.6||38.2||-30.4||6.3|
|iShares CDN REIT Sector Index||XRE-T||Real Estate Equity||960.0||0.49||3.6||53.2||-38.3||-6.0|
|S&P/TSX Total Return||3.1||35.1||-33.0||9.8|
|BMO Nesbitt Burns Cdn Small Cap Index||7.4||75.1||-46.6||2.0|
|MSCI World ($ Cdn)||0.3||11.8||-26.1||-7.1|
|S&P 500 Composite ($ Cdn)||1.8||5.5||-23.8||-12.2|
|S&P/TSX Small Cap Total Return||4.9||62.4||-50.0||0.4|
|Source: Globe Investor, companies|
© 2007 The Globe and Mail. All rights reserved.
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