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In search of funds that beat the index

What are we looking for?

Given that it is tough for many money managers to beat their index, let's see how many Canadian stock funds have been able to do so this year.

The screen

We screened about 120 funds to get the 15 top performers in the Canadian equity category for the first 11 months.

Segregated, pooled and duplicate versions were excluded.

What did we find?

Eight funds outpaced the S&P total-return index of 13 per cent, while the next seven were close.

The leaders were RBC O'Shaughnessy All-Canadian Equity, which rose nearly 18.8 per cent, while Exemplar Canadian Focus Portfolio gained 18.1 per cent.

RBC O'Shaughnessy All-Canadian Equity, which uses a quantitative strategy, invests equally in value and growth stocks.

Most of the outperformance this year has come from the energy, materials and financial sectors, said manager James O'Shaughnessy of O'Shaughnessy Asset Management.

Big movers included TransGlobe Energy Corp., Semafo Inc. and Dundee REIT.

Currently, there are 213 names in the fund. "We rebalance our portfolio annually so the composition of the portfolio could change," Mr. O'Shaughnessy said.

Exemplar Canadian Focus Portfolio is half invested in resources with 18 per cent in energy and the rest in basic materials.

The stocks are not a play on commodity prices, but rather on exploration and production growth, said manager Veronika Hirsch of BluMont Capital Corp.

This fund got a lift this year from mid-cap gold stocks that make up about 20 per cent of the portfolio.

They included names such as Red Back Mining Inc. and Andean Resources Ltd., which were takeover targets this year. "I have very little in financials - about 8 per cent," Ms. Hirsch added. "I don't find the banks cheap, and I think their growth prospects are slowing."

She is upbeat on the Canadian stock market next year because she expects money to flow into equities from investors abandoning bonds on concerns of rising interest rates. "The two areas that will do well are high-dividend stocks and resources," she suggested. "That is how we are positioned... What I like is dividend growth rather than the actual yield.

"The dividend growth in BCE [which I own] has been spectacular."



FundMERAssets($-mil)YTD % rtn(Nov 30)2009% rtn2008% rtn2007% rtn2006% rtn2005% rtn
RBC O'Shaughnessy All-Can Equity1.73227.418.727.9-31.7---
Exemplar Canadian Focus Port Cl-A2.05*47.718.115.8----
JOV Canadian Equity Class4.60N/A17.133.1----
Bissett All Cdn Focus F1.514.015.335.3-39.212.420.518.3
Ark StoneCastle Stable Growth Class4.976.214.6-----
Dynamic Aurion Canadian Equity Cl-A2.4930.314.0-----
DFA Canadian Core Equity A1.49N/A13.941.7-
Bissett Canadian Equity-F1.27247.613.240.3-32.61.512.420.7
Counsel Canadian Growth A2.7220.712.9-----
FÉRIQUE Equity0.77515.912.836.6-32.010.917.619.7
Mackenzie Saxon Stock Fund-SI2.02291.212.835.3-
iShares Dow Jones Cda Sel Gwth Idx0.50N/A12.722.2-29.321.4--
EdgePoint Canadian Portfolio FE2.37210.012.450.2----
PH&N Canadian Equity Value-D1.163.512.3-----
Veritas Canadian Select Portfolio2.732.812.214.8----
S&P/TSX Total Return13.035.1-33.09.817.324.1
* Also charges a performance fee of 20% over a hurdle rate. Source: Globe Investor

© 2007 The Globe and Mail. All rights reserved.

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