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Mutual Fund News

Funds that are swimming against the tide

swon@globeandmail.com

What are we looking for?

Global stock markets gyrated last week on investor concerns about the implications of the Standard & Poor's downgrade of U.S. debt and continued euro-zone debt problems. Given the increased market volatility this year, let's see which Canadian stock funds have managed to stay in positive territory.

The screen

We looked for the 15 top performers among Canadian stock funds this year to Aug. 15. We included Canadian equity, Canadian dividend and income and also Canadian focused equity funds, which can invest up to nearly 50 per cent in foreign stocks. U.S. dollar, segregated and duplicate versions of the funds were excluded.

What did we find?

Canadian stock funds invested in preferred shares were sitting pretty, while the S&P/TSX Total Return Index was off 12 per cent.

Within this niche of funds, Omega Preferred Equity emerged at the top of the heap with a 2.9 per cent gain followed by Manulife Preferred Income, up 2.7 per cent and Claymore S&P/TSX Preferred Share exchange-traded fund, up 2.3 per cent.

Preferred shares, unlike their common-share cousins, have the characteristics of both a stock and bond. Investors make money from preferred shares mainly through their dividends, and have a greater claim on a company's assets and earnings in the event of bankruptcy. But preferred shares are also like fixed-income investments because they are sensitive to swings in interest rates.

Omega Preferred Equity is run by the asset management arm of insurer Intact Financial Corp., formerly ING Insurance Co. of Canada. Intact, which has run a portfolio of preferred shares since the late 1980s, was tapped to run this mutual fund for National Bank of Canada in 2007.

Among common share funds, Value Contrarian Canadian Equity and Standard Life Diversified Income outpaced peers, respectively, gaining 0.41 per cent and 0.17 per cent.

Value Contrarian Canadian Equity got some help during the recent downturn by having just over 20 per cent in cash built up from the sale of "fully valued positions," and having a lack of exposure to battered commodity stocks except for a few oil names, said Benjamin Horwood, president of Value Contrarian Asset Management. Winners in his fund this year have included Paladin Labs Inc. and, until recently, Exxon Mobil Corp.

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HOW LARGE-CAP CANADIAN STOCK FUNDS FARED THIS YEAR TO AUG. 8

AssetsYTD % rtnCalendar year % returns
Fund nameMER($-mil)Category(Aug. 8)201020092008200720062005
Omega Preferred Equity1.52395.1Cdn Div & Incm Equity2.99.026.6-16.0n/an/an/a
Manulife Preferred Income2.2751.9Cdn Div & Incm Equity2.75.2n/an/an/an/an/a
Claymore S&P/TSX Pref Share ETF0.50727.4Cdn Div & Incm Equity2.36.626.2-17.1n/an/an/a
JOV Leon Frazer Preferred Equity-A1.8741.6Cdn Div & Incm Equity1.26.0n/an/an/an/an/a
Value Contrarian Canadian Equity2.5025.6Canadian Equity0.412.032.6-28.85.510.114.4
PS Canadian Preferred Share Idx A *1.6568.8Cdn Div & Incm Equity0.2n/an/an/an/an/an/a
Standard Life Diversified Income-A2.4612.6Cdn Focused Equity0.28.016.3-12.51.51.6n/a
Desjardins Fn Pl Ethical Cdn Equity0.750.9Canadian Equity-0.214.0n/an/an/an/an/a
Fidelity Canadian Large Cap-A2.49117.4Cdn Focused Equity-2.117.336.9-29.913.79.128.7
iShares Diversified Monthly Income0.55304.1Canadian Equity-2.415.740.4-25.96.0-3.2n/a
Claymore S&P/TSX Cdn Dividend ETF0.64567.7Cdn Div & Incm Equity-3.615.238.2-30.46.3n/an/a
RBC Canadian Equity Income2.06668.5Cdn Div & Incm Equity-3.824.059.5-18.89.5n/an/a
McLean Budden Dividend Income Equ D1.2517.6Cdn Div & Incm Equity-4.412.827.4-25.70.2n/an/a
Trimark Cdn Plus Dividend Class A2.4653.0Cdn Focused Equity-4.49.926.7-25.8n/an/an/a
O'Leary Canadian Equity Yield-A **2.341.4Canadian Equity-4.5n/an/an/an/an/an/a
S&P/TSX Composite Index-13.214.430.7-35.07.214.521.9
S&P/TSX Total Return-12.017.635.1-33.09.817.324.1
* Launched in June, 2011; ** Launched in April, 2010. Source: Globe Investor

© 2007 The Globe and Mail. All rights reserved.

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