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Mutual Fund News

Fund performance: A tale of two time periods

swon@globeandmail.com

What are we looking for?

How the biggest Canadian stock funds have fared over the longer haul.

The search

We screened the 15 largest funds by assets in three categories: Canadian equity, Canadian focused equity (which can invest up to 50 per cent in foreign stocks) and Canadian dividend and income equity. We ranked them by five-year returns, and then compared them over 10 years. U.S. dollar, segregated, pooled and duplicate versions of the funds were excluded.

What did we find?

The iShares CDN Large Cap 60 exchange-traded fund was the leader over five years with an annualized return of 6.3 per cent.

But this same exchange-traded fund, which invests in the 60 largest stocks in the S&P/TSX composite index, lagged all the other funds with an annualized return of 2.9 per cent over 10 years.

So what gives?

With about 45 per cent currently invested in energy and materials stocks, the exchange-traded fund has certainly benefited from the boom in commodity stocks in recent years.

The iShares ETF, which has a management expense ratio of 0.17 per cent, would also be expected to outperform "because our fees are lower than most mutual funds," said Oliver McMahon, director of product management for iShares Canada.

Over a decade, the ETF's trailing performance might be due to the fact that smaller-cap companies have done better than larger companies, while "over the last five years, large-cap stocks have outperformed small-cap stocks," Mr. McMahon said.

"We would only ever hold Canadian stocks," he said. "If a manager gets lucky with a foreign stock or a [smaller cap] Canadian stock, then that is going to add value."

***

Five- and 10-year returns for giant Canadian stock funds ended June 30
As ofJune, 2010 Latest (June 30)
Fund Category Assets ($mil) MER 5-yr (%) 10-yr (%) 2009 (%) 2008 (%) 2007 (%) 2006 (%) 2005 (%)
iShares CDN Large Cap 60 IndexCdn. Equity11056.50.176.32.931.5-31.110.921.525.9
CI Signature Select Cdn.Cdn. Focused Equity3082.82.315.08.028.0-26.03.021.022.9
TD Cdn. EquityCdn. Focused Equity2894.02.075.04.847.2-42.210.523.126.2
CI HarbourCdn. Focused Equity5639.42.314.67.126.9-24.56.215.223.5
Fidelity True North-BCdn. Equity1700.72.204.64.830.6-34.412.817.623.6
RBC Cdn. DividendCdn. Dividend and Incm Equity10431.21.704.38.327.3-27.03.015.121.1
TD Dividend GrowthCdn. Dividend and Incm Equity4050.61.924.18.332.8-29.91.315.923.8
RBC Cdn. EquityCdn. Equity4485.61.964.04.230.1-33.89.417.523.0
Scotia Cdn. DividendCdn. Dividend and Incm Equity2359.91.653.17.226.0-27.76.512.819.4
AGF Cdn. Large Cap Div-ClassicCdn. Focused Equity2341.31.763.04.526.0-31.47.117.120.8
CI Cdn. InvestmentCdn. Focused Equity3641.42.262.87.327.6-27.41.414.222.0
BMO DividendCdn. Dividend and Incm Equity3839.91.702.17.519.8-26.31.812.920.9
MD EquityCdn. Focused Equity1724.51.451.54.525.5-28.80.716.518.3
PH&N Dividend Income-DCdn. Dividend and Incm Equity1885.11.110.76.633.0-32.5-3.916.513.6
Invesco Select Cdn. EquityCdn. Focused Equity1777.12.380.24.317.7-25.5-1.013.510.4
S&P/TSX total return5.53.335.1-33.09.817.324.1
S&P 500 composite ($Cdn.)-5.6-6.55.5-23.8-12.213.6-0.2
Source: GlobeInvestor.com

© 2007 The Globe and Mail. All rights reserved.

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