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Mutual Fund News

For resource-heavy funds, a May to forget

swon@globeandmail.com

What are we looking for?

Funds hit the hardest in May.

It was a volatile month for stock markets, lending more credence to the folksy truism that investors should "sell in May and go away."

The screen

We looked for the biggest losers during May. U.S. dollar, segregated, pooled, alternative strategy and duplicate versions of funds were excluded.

What did we find?

A case of déjà vu.

Like last year, many resource-heavy and smaller-cap funds were hurt in May.

Concerns about slower economic growth, particularly in resource-hungry China, and investors' loss of appetite for riskier investments played havoc with the funds' returns.

Among mutual funds, Creststreet Alternative Energy and Creststreet Resource lost the most, respectively, shedding 23.4 per cent and 18.8 per cent.

Creststreet's smaller-cap resource fund was affected by heightened concern that China's economy is heading for a hard landing, but "we actually think [the Chinese] are doing a good job of engineering a soft landing," said Robert Toole, chief investment officer at Creststreet Asset Management Ltd. "The junior resource sector had a very difficult month."

On the other hand, the performance of the Creststreet's alternative energy fund has largely been affected by an oversupply of natural gas in North America, Mr. Toole suggested. "Because natural gas is at such a low price right now, that makes higher-cost, renewable energy power production relatively less competitive."

Among exchange-traded funds, BMO S&P/TSX Equal Weight Global Base Metals ETF declined the most with a 19.7-per-cent loss. "Base metals are very sensitive to global growth expectations," said Mark Raes, an ETF portfolio manager at BMO Global Asset Management. "The combination of slowing growth in China and India, the escalating European debt crisis and a poor U.S. jobs report [recently] has negatively impacted this asset class."

Because the ETF hedges part of its U.S. dollar exposure, the rise in the value of the greenback also negatively affected the fund, he said.

Despite the red ink in many funds, bargain-hunting investors might consider the recent downturn as a buying opportunity. The biggest losers could potentially be among the biggest gainers in a strong market rebound.

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BIGGEST FUND LOSERS IN MAY, 2012

Assets as
at Apr. 30to May 31Calendar year returns
FundCategoryMER($ mil.)1 monthYTD2011201020092008
Creststreet Alternative EnergyMisc./Undisclosed Holdingsn/an/a-23.42%-24.53%-30.83%-7.52%23.67%142.70%
BMO S&P/TSX EW Gbl Base Metals ETFNatural Res. Equity0.5851.4-19.73%-19.83%-32.88%42.81%
Creststreet ResourceMisc./Undisclosed Holdings3.44n/a-18.80%-23.24%-31.45%41.03%48.74%-67.39%
Qwest Energy Canadian Resource Cl ANatural Res. Equity4.0925.2-16.69%-19.93%-42.00%22.54%15.28%-40.37%
Terra Small Cap Resource-RNatural Res. Equityn/an/a-16.02%-13.94%-29.65%54.08%32.02%-47.25%
Marquest ResourceNatural Res. Equityn/an/a-15.90%-13.14%-23.91%69.93%69.50%-52.31%
AlphaNorth Growth Fund Series ACdn. Small/Mid Cap Equityn/an/a-15.87%-13.60%
Redwood Global Small CapGlobal Small/Mid Cap Equity3.11n/a-15.86%-11.49%-37.09%74.05%150.31%
FrontierAlt Resource Capital Cl-ANatural Res. Equityn/a1.9-15.48%-18.89%-46.38%25.50%70.82%-72.70%
Front Street Small Cap CC-AMiscellaneous - Other6.3313.2-14.89%-25.58%-27.86%42.47%111.78%16.28%
Renaissance Global ResourcesNatural Res. Equity3.3437.2-14.76%-19.16%-30.55%50.43%65.46%-45.98%
iShares S&P/TSX Glob Base MetalsNatural Res. Equity0.55n/a-14.64%-13.12%
BMO Energy Commodities Idx ETFMiscellaneous - Commodityn/a3.3-14.60%-8.41%
CIBC Canadian ResourceNatural Res. Equity2.5292.6-14.59%-19.56%-30.75%54.87%68.41%-51.51%
Investors Glo Natural Resource Cl-ANatural Res.Equity2.87265.0-14.54%-13.17%-25.20%13.28%67.88%-44.42%
S&P/TSX Total Return-6.14%-2.60%-8.71%17.61%35.06%-33.00%
Source: Lipper

© 2007 The Globe and Mail. All rights reserved.

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