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Mutual Fund News

Small, nimble funds fared well over past three years

swon@globeandmail.com

What are we looking for?

Leaders among Canadian-focused equity funds over the past three tumultuous years. Let's see how these funds fared through the 2008-09 market meltdown and subsequent rebound. Unlike pure Canadian equity funds, they can also invest up to 50 per cent in foreign equities.

The screen

We ranked our top 15 funds according to annualized returns over the three years ended Dec. 31. U.S. dollar, segregated, pooled and duplicate versions of the funds were excluded.

What did we find?

Small can be beautiful.

Investors in the $317-million Sentry Diversified Total Return - the top performer - earned 7 per cent annually over three years compared with 1.6 per cent for the $6.4-billion CI Harbour fund.

This is not a knock against CI Harbour's manager, Gerry Coleman, whose three-year return is still better than many of his peers.

His annualized return of 8 per cent over 10 years is also impressive.

But the three-year number does illustrate that smaller funds can be more nimble.

Even his colleague Alan Radlo's $657-million CI Cambridge Canadian Equity fund did slightly better with a 2.1-per-cent average annual return.

Sentry Diversified Total Return is even more flexible than its peers because its mandate lets it invest up to 100 per cent in cash, up to 30 per cent bonds and short up to 20 per cent of the assets.

But it can't invest more than 15 per cent in small-cap stocks.

Andrew McCreath of Sentry Investments took over the fund in January, 2009. As a defensive move, he raised cash to 70 per cent of the fund in early 2009 and mid-2010. Last year, the average cash weighting was 40 per cent. Given that investors lost a lot of money after the Internet bubble burst in 2000 and during the 2008 crash, "they care more about capital preservation than they ever have," he said.

But he reduced his cash to 25 per cent last fall after becoming moderately bullish because of the $1.5-trillion (U.S.) stimulus being injected into the U.S. economy, and improving economic data. But that cash weighting could rise again as the stock market rally is likely to lose steam later this year as earnings growth decelerates, Mr. McCreath suggested. "I think the market will be up in the first half and give some back in the second half of the year."

*****

CANADIAN FOCUSED EQUITY FUNDS OVER THREE YEARS ENDED DEC. 31, 2010

Fund Name3-yr% rtn(Dec. 31)% rtn2010% rtn2009% rtn2008% rtn2007% rtn2006% rtn2005MERAssets($-mil)(Dec. 31)
Sentry Diversified Total Rtn7.019.731.8-22.42.218.8-2.75317.2
Dynamic Canadian Value Class6.914.448.5-28.01.729.328.22.99858.4
DMP Canadian Value Class6.214.147.6-29.01.128.0-2.6915.8
Dynamic Value Fund of Canada5.614.743.0-28.24.526.526.52.342,240.4
RBC North American Value4.715.328.7-22.74.617.517.52.00308.6
National Bank Cdn Opportunities4.213.238.0-27.5-1.713.49.42.30227.7
Investors Cdn Large Cap Value-A4.28.960.8-35.41.212.126.22.702,996.9
Mackenzie Cundill Cdn Security 'C'3.919.127.0-25.8-4.99.010.82.381,509.9
Standard Life Diversified Income-A3.28.016.3-12.51.51.6-2.4112.7
Trimark Canadian-SC2.68.836.9-27.5-10.217.48.51.67554.1
Beutel Goodman Canadian Intrinsic-D2.514.18.5-12.9-1.423.27.71.473.1
Dynamic Focus+ Equity2.511.420.9-20.12.45.610.72.34429.8
Lakeview Disp Leadership Cdn Eq-A2.219.012.3-20.113.94.621.52.34137.8
CI Cambridge Canadian Eqt Corp Cl2.112.523.8-23.6---2.39656.7
CI Harbour1.69.526.9-24.56.215.223.52.396,365.8
S&P/TSX Total Return2.117.635.1-33.09.817.324.1
Source: Globe Investor

© 2007 The Globe and Mail. All rights reserved.

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