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Award-winning mutual funds, revisited

What are we looking for?

How some winners of the 2010 Lipper Awards for mutual funds have fared over the past year.

U.S. fund research firm Lipper Inc., a unit of Thomson Reuters, hands out its awards during the registered retirement savings plan season, so investors may be tempted to buy the winners. Let's see how some of those winners performed a year later.

The screen

We looked at the one-year return to Jan. 31 for funds that won 2010 Lipper awards for the best three-year returns achieved with lower risk. Lipper highlights this period because it can encompass a full-market cycle. We limited the winners to 15 popular categories.

What did we find?

Five of the funds screened posted double-digit losses. And the manager of one of them left his fund six months after it won the Lipper award.

The fact that some winners lost money brings home the fact that investors should be careful about investing in funds that have had strong recent results. Stock don't go up forever, and markets struggled last year amid worries about the euro-zone debt crisis and slower global growth.

Front Street Special Opportunities Canadian Fund, which is managed by Normand Lamarche of Front Street Capital, shed nearly 20 per cent for the year ended Jan. 31. The loss by this nature resource equity fund comes after it enjoyed two strong years, including a spectacular 131-per-cent gain in 2009.

Castlerock Global Leaders A (formerly Hartford Global Leaders), which is run by Bill Kanko of Black Creek Investment Management Inc., shed nearly 15 per cent. The loss by this global equity fund follows two calendar years of double-digit returns.

It sounds counterintuitive, but it can be better to buy losers than funds that have recently made big bucks. Front Street Special Opportunities has risen 11.8 per cent this year to Feb. 24, while Castlerock Global is up 10.1 per cent.

Sentry Diversified Total Return, a Canadian stock fund that can invest up to half its assets in foreign stocks, lost 10.8 per cent for the year ended Jan. 31. Its former lead manager Andrew McCreath parted ways last August with Sentry Investments because of a difference in investment philosophy. John Kim, who had co-managed the fund, is now overseeing it. The fund has risen 3.8 per cent this year.

Investors need to keep in mind that even award-winning managers don't always stick around. While the successor could always do as good or better job, there are no guarantees.



To Calendar
AssetsFeb. 24, 2012To Jan. 31, 2012Year Returns
FundCategoryMER($ mil.)YTD1 year3 years5 years20112010
Beutel Goodman Income-DCanadian Fixed Income0.791902.40.16% 8.14%7.72%6.60% 7.15%6.22%
Bissett Canadian Dividend-ACdn. Dividend and Income Equity2.48261.73.01%0.09%17.07%4.01%0.83%16.28%
Brandes Emerging Markets EquityEmerging Markets Equity2.69168.614.20%-11.82%23.29%1.81%-19.83%10.15%
CI Signature High Income Corp ClassGlobal Neutral Balanced1.59828.03.39%3.95%15.71%4.13%4.50%14.71%
CIBC Nasdaq IndexU.S. Equity1.2051.212.26%7.79%18.56%2.67%4.52%12.91%
Castlerock Global Leaders AGlobal Equity2.62143.910.08%-14.73%10.51%-2.92%-14.77%12.18%
DFA Canadian Core Equity ACanadian Equity1.497.84%-8.42%17.59%1.51%-11.87%20.69%
Fidelity Special Situations-ACdn. Focused Small/Mid Cap Equity2.49171.39.52%-12.07%23.40%-15.84%25.00%
Front Street Special Opp Cdn CC-BNatural Resources Equity5.41149.811.79%-19.55%37.38%9.33%-26.10%43.63%
Lakeview Disp Leadership Hi Inc ACanadian Equity Balanced2.39487.22.40%5.04%17.66%7.80%6.75%19.23%
Manulife Strategic Income FundHigh Yield Fixed Income2.231904.72.95%3.05%7.51%7.57%2.04%8.60%
RBC Canadian Equity IncomeCdn. Dividend and Income Equity2.081125.47.31%11.27%30.68%14.79%10.34%23.99%
RBC Global High Yield Bond-AdvHigh Yield Fixed Income1.704.16%8.20%14.16%7.41%6.42%11.03%
Sentry Diversified Total RtnCanadian Focused Equity2.88253.13.76%-10.84%12.69%2.00%-12.47%19.74%
Sentry Precious Metals GrwthPrecious Metals Equity2.72757.219.53%-1.06%38.00%14.64%-23.09%78.52%
S&P/TSX Total Return6.75%-5.65%15.97%1.94%-8.71%17.61%
S&P 500 Composite Total Return Idx ($Cdn)7.03%4.53%11.29%-2.82%4.42%9.35%
MSCI World ($ Cdn)-2.16%9.30%-4.19%-2.88%6.76%
Source: Globe Investor, Lipper Inc., Bloomberg

© 2007 The Globe and Mail. All rights reserved.

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