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Resources were the wild card for small-cap funds this year

swon@globeandmail.com

What are we looking for?

In times of volatile markets, smaller-company stocks get hurt more than their large-cap cousins as investors become more defensive, and dump riskier, harder-to-sell names. Against this backdrop, where many resource stocks have struggled, let's see how Canadian smaller company funds have fared.

The screen

We ranked the eight best and worst performers in the Canadian small- or mid-cap category for the first 11 months of this year. U.S. dollar, segregated and pooled funds were excluded as well as those not sold by prospectus. We also excluded duplicate versions of funds.

What did we find?

A handful of solid returns in a sea of red.

Steadyhand Small-Cap Equity led the pack with a 11.2-per-cent gain, while Galileo High Income Plus racked up a 6.4-per-cent return. At the other end of the spectrum, First Trust Raymond James Canadian Focus Picks got spanked with a 24.5-per-cent loss.

Winning stocks in the Steadyhand fund's portfolio of 16 names included Canadian Helicopters Group, Total Energy Services and Coastal Energy.

"If you get a third [of the portfolio] going in the right direction, that can easily drive the portfolio," says its manager Will Wutherich of Montreal-based Wutherich & Co. Investment Counsel Inc. "We are vastly underweight resources so that has helped. I own only one gold stock and have no base metals."

In contrast, First Trust Raymond James Canadian Focus Picks had a 60- to 75-per-cent weighting in materials and energy stocks this year. The fund, which invests in top picks of analysts at brokerage Raymond James Ltd., also has high turnover.

The fund recently sold Silvercorp Metals, which took a hit on concerns about allegations the Chinese silver company had accounting issues. Names such as Canfor Pulp Products, Fortress Paper, Canfor, Trinidad Drilling and Sierra Wireless Inc. have also left the portfolio. New additions included Agnico Eagle Mines, Western Energy Services, and Neo Material Technologies.

Fees can also eat away at returns. In addition to a 2.47-per-cent management expense ratio and trading costs [1.31 per cent in the latest semi-annual report], the First Trust fund can also charge a 20-per-cent annual performance fee for beating its benchmark. The last fee, however, looks unlikely this year.

*****

HOW CANADIAN SMALL-TO MID-CAP EQUITY FUNDS HAVE FARED THIS YEAR TO NOV. 30

Last reportedYTD to1 year to3 years toAnnual returns (Jan. 1-Dec. 31)
FundMERassets (in $ mil.)Nov. 30Oct. 31, 2011Oct. 31, 20112010200920082007
Best 8 performers
Steadyhand Small-Cap Equity1.7020.611.16%12.17%12.36%21.92%14.64%-29.66%
Galileo High Income Plus2.5661.46.40%12.87%25.37%34.23%57.78%-22.19%6.43%
Sentry Small/Mid Cap Income2.84115.35.35%7.74%20.55%26.28%43.52%-22.21%14.09%
Sentry Diversified Income Fund Series X1.26533.65.17%6.98%23.77%
Mackenzie Saxon Dividend Income-SI1.57108.40.80%5.97%17.09%22.90%44.94%-28.29%10.90%
Mawer New Canada1.46131.70.74%6.73%20.76%23.91%51.23%-38.35%16.63%
Pender Small Cap Opportunities2.500.60.63%13.06%22.85%
Dynamic Small Business2.77493.60.33%5.55%21.04%27.26%38.84%-18.05%18.53%
Worst 8 performers
First Trust Raymond James Cdn Focus2.4726.2-24.54%-18.22%37.91%59.44%127.50%
Acuity Canadian Small Cap3.0776.8-23.25%-7.26%21.12%38.64%71.86%-58.97%9.41%
Standard Life Cdn Small Cap-A2.53143.7-20.78%-12.39%8.27%19.51%43.12%-42.81%7.69%
NexGen NA Small/Mid Cap-CG2.770.2-19.62%-6.68%0.11%10.24%8.02%-14.98%15.83%
Front Street Growth-B2.43177.4-19.31%-7.02%34.07%44.63%129.91%-53.52%-1.30%
Matrix Small Companies3.517.8-18.39%8.65%13.66%43.93%47.17%-57.40%-1.02%
Matrix Strategic Small Cap3.1311914.5-17.62%0.71%10.30%21.08%48.47%-50.57%1.44%
Scotia Canadian Small Cap2.4756.8-17.19%-3.93%23.62%20.98%78.31%-47.89%-0.79%
BMO Nesbitt Burns Cdn Small Cap Index0.37%26.99%38.53%75.10%-46.61%2.01%
S&P/TSX Small Cap Total Return-14.61%-3.15%22.24%35.10%62.38%-50.04%0.44%
Source: Globe Investor

© 2007 The Globe and Mail. All rights reserved.

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