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.
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.
HOW 2010 LIPPER AWARD WINNERS FARED OVER THE PAST YEAR
|Assets||Feb. 24, 2012||To Jan. 31, 2012||Year Returns|
|Fund||Category||MER||($ mil.)||YTD||1 year||3 years||5 years||2011||2010|
|Beutel Goodman Income-D||Canadian Fixed Income||0.79||1902.4||0.16%||8.14%||7.72%||6.60%||7.15%||6.22%|
|Bissett Canadian Dividend-A||Cdn. Dividend and Income Equity||2.48||261.7||3.01%||0.09%||17.07%||4.01%||0.83%||16.28%|
|Brandes Emerging Markets Equity||Emerging Markets Equity||2.69||168.6||14.20%||-11.82%||23.29%||1.81%||-19.83%||10.15%|
|CI Signature High Income Corp Class||Global Neutral Balanced||1.59||828.0||3.39%||3.95%||15.71%||4.13%||4.50%||14.71%|
|CIBC Nasdaq Index||U.S. Equity||1.20||51.2||12.26%||7.79%||18.56%||2.67%||4.52%||12.91%|
|Castlerock Global Leaders A||Global Equity||2.62||143.9||10.08%||-14.73%||10.51%||-2.92%||-14.77%||12.18%|
|DFA Canadian Core Equity A||Canadian Equity||1.49||7.84%||-8.42%||17.59%||1.51%||-11.87%||20.69%|
|Fidelity Special Situations-A||Cdn. Focused Small/Mid Cap Equity||2.49||171.3||9.52%||-12.07%||23.40%||-15.84%||25.00%|
|Front Street Special Opp Cdn CC-B||Natural Resources Equity||5.41||149.8||11.79%||-19.55%||37.38%||9.33%||-26.10%||43.63%|
|Lakeview Disp Leadership Hi Inc A||Canadian Equity Balanced||2.39||487.2||2.40%||5.04%||17.66%||7.80%||6.75%||19.23%|
|Manulife Strategic Income Fund||High Yield Fixed Income||2.23||1904.7||2.95%||3.05%||7.51%||7.57%||2.04%||8.60%|
|RBC Canadian Equity Income||Cdn. Dividend and Income Equity||2.08||1125.4||7.31%||11.27%||30.68%||14.79%||10.34%||23.99%|
|RBC Global High Yield Bond-Adv||High Yield Fixed Income||1.70||4.16%||8.20%||14.16%||7.41%||6.42%||11.03%|
|Sentry Diversified Total Rtn||Canadian Focused Equity||2.88||253.1||3.76%||-10.84%||12.69%||2.00%||-12.47%||19.74%|
|Sentry Precious Metals Grwth||Precious Metals Equity||2.72||757.2||19.53%||-1.06%||38.00%||14.64%||-23.09%||78.52%|
|S&P/TSX Total Return||6.75%||-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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