What we're looking at
You want a core Canadian equity fund for your portfolio. Could an exchange-traded fund be the right choice?
Let's look at the best performers among Canadian equity funds over the past 10 years to see where ETFs stand in the group. One-year results are also shown here so that you can see how these funds have performed during the challenging markets we've had in recent months. You'll also find quartile rankings, which divide funds in a category into four groups according to their returns. First quartile is best, fourth is worst. (Only funds that made the 10-year top quartile are shown here; see the full list online at tgam.ca/cruncher.)
What we found
There are two Canadian equity ETFs with a history going back 10 years or more and they both make the Top 10 on our list. For do-it-yourself investors, this suggests ETFs are a simple, attractive alternative to mutual funds. Remember, traditional ETFs give you the returns of stock indexes minus a small amount for fees. What strategy do competing mutual funds use, and can it be counted on to work as well in the future as it has in the past? You decide.
Investors who are paying for the services of an adviser have a different calculation to make regarding ETFs. Let's use the example of a fee-based account where an adviser layers a fee of 1 per cent of a client's account assets over top of the cost of owning an ETF (measured in our screen through the management expense ratio, or MER).
Now, what if we reduced the returns for the two ETFs in the Top 10 on our list by one percentage point a year to reflect advisory fees? The average annual 10-year return for the iShares S&P/TSX Capped Composite Index Fund (XIC) falls to 6.56 per cent, while the iShares S&P/TSX 60 Index Fund (XIU) falls to 6.46 per cent. Those returns would put both ETFs high up in the second quartile of Canadian equity funds over the past 10 years, which is still quite respectable.
Prefer mutual funds? Then cross-check this screen with Tuesday's list of five-year Canadian equity fund leaders (read it online at http://tgam.ca/CrB1) to find the most consistently good performers.
TOP CANADIAN EQUITY FUNDS: THE 10-YEAR VIEW
|As of July 31, 2011|
|Assets||Latest||10 YR Avg||10YR||1 YR||1 YR|
|Name||($ millions)||MER||% Rtn||Quartile||% Rtn||Quartile|
|Leith Wheeler Canadian Equity B||123.6||1.57||8.75||1||14.53||1|
|Mawer Canadian Equity||156.3||1.24||8.69||1||17.30||1|
|Beutel Goodman Canadian Equity-D||1725.9||1.53||7.82||1||9.57||3|
|Fidelity Cdn Disciplined Equity-A||517.9||2.49||7.78||1||13.29||1|
|Altafund Investment Corp.||53.5||2.43||7.70||1||10.67||2|
|iShares S&P/TSX Cap Composite Index||1349.1||0.27||7.56||1||12.27||2|
|IA Clarington Cdn Conservative Eqty||379.8||2.41||7.51||1||12.54||2|
|iShares S&P/TSX 60 Index||10180.7||0.17||7.46||1||8.85||3|
|Russell Canadian Equity||331.7||7.26||1||11.72||2|
|Value Contrarian Canadian Equity||2.50||7.22||1||10.66||2|
|RBC Canadian Index||649.3||0.70||7.20||1||12.60||2|
|Mackenzie Saxon Stock Fund-SI||262.0||2.04||7.20||1||7.71||4|
|TD Canadian Index||955.1||0.86||7.02||1||12.39||2|
|Scotia Canadian Index||254.6||0.99||6.91||1||12.26||2|
|Altamira Canadian Index||277.6||0.65||6.89||1||9.00||3|
|RBC Cdn Equity||5421.5||2.01||6.87||1||12.15||2|
|CIBC Canadian Index||751.8||1.12||6.85||1||12.09||2|
|Source: Globe Investor, company websites|
© 2007 The Globe and Mail. All rights reserved.
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