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Mutual Fund News

Fund's focus on banks, REITs pays off

swon@globeandmail.com

What are we looking for?

How North American equity funds have fared recently.

Let's see how these funds have navigated through the lacklustre Canadian and more robust U.S. stock markets.

The screen

We looked at the one-year returns ended last Nov. 30 for this category.

North American equity funds must have at least 90 per cent of their holdings in Canadian- or U.S.-listed stocks.

U.S. dollar, segregated and duplicate versions of the funds were excluded.

What did we find?

A fund focused on banks and real-estate investment trusts at the top of the heap.

Harvest Banks & Buildings Income, which converted to a mutual fund from a closed-end fund in late 2011, led the pack with 13.1-per-cent gain.

Unlike its peers, this fund is more akin to a sector play because its mandate is to be invested mainly in financials such as banks and insurers, as well as real-estate companies or REITs. It is now 22 per cent invested in U.S. securities.

The fund has outperformed partly because of a bet on a U.S. housing recovery through U.S. financial names such as Bank of America Corp., Wells Fargo & Co. and JPMorgan Chase & Co. It also owns Canadian stocks like Toronto-Dominion Bank, which earns 55 per cent of its revenue south of the border, and Tricon Capital Group Inc., a residential real estate investment company.

Other winning holdings have been smaller real estate plays like Mainstreet Equity Corp. and Killam Properties Inc., and also Primaris REIT, a mall operator now facing a hostile takeover bid from KingSett Capital Inc. The fund's exposure to this sector has more recently been cut to 40 per cent from about 60 per cent. "The real-estate market is still in good shape, but the big run has already happened," said Paul Gardner, a co-manager on the fund at Toronto-based Avenue Investment Management Inc.

Co-manager Paul Harris, who oversees the financial securities for the fund, said he continues to like Canadian banks, but sees more potential in their U.S. peers. "We think the upside or capital-gain potential is really in U.S. banks" as the housing market and consumer confidence improves, he said. "[U.S. banks] are trading cheaper on most fundamental metrics."

*****

HOW NORTH AMERICAN EQUITY FUNDS FARED FOR ONE YEAR ENDED NOV. 30, 2012*

FundSym1-year % return (Nov. 30)3-year % return (Nov. 30)2011 % return2010 % return2009 % return2008 % returnMERAssets ($-mil)
Harvest Banks & Buildings Inc Cl A13.1%-----2.838.7
Mackenzie Ivy Enterprise12.4%11.2%-2.7%17.8%14.3%-16.9%2.53126.3
Aston Hill Capital Growth10.9%21.0%28.3%18.2%36.1%-41.1%2.7031.1
BMO GDN North American Dividend Advisor Series9.3%7.3%3.9%7.9%1.8%-2.492.3
BMO North American Dividend9.3%7.2%3.8%7.9%1.8%-24.7%2.5241.5
iShares S&P/TSX NA Pref Stock CAD-Hdgd ETFXPF-T9.0%-1.5%---0.48169.4
Mackenzie Univ NA Growth Class7.8%2.8%-11.3%7.7%25.2%-21.8%2.59202.9
TD North American Dividend-I7.4%6.6%8.7%5.7%5.9%-24.3%2.56148.1
Trimark North Amer Endeavour Class6.0%0.3%-31.1%24.5%55.7%-24.3%2.9813.3
Mackenzie Cundill American Cl5.0%5.8%-5.6%12.9%31.9%-38.7%2.5734.2
Investors North American Equity-A4.8%2.4%-11.6%11.3%31.0%-30.0%2.64478.0
Aventine BTH Tactical Growth A-4.3%-----1.506.5
Renaissance US Equity Growth-10.9%-1.8%-9.3%13.9%10.1%-37.8%2.7522.6
Webb Enhanced Growth-26.8%-21.5%-47.2%13.9%53.0%-5.28N/A
S&P/TSX Total Return3.4%5.1%-8.7%17.6%35.1%-33.0%
S&P 500 Composite Total Return Idx($Cdn)13.1%8.9%4.4%9.4%8.1%-21.9%
Source: Lipper; * December data not available

© 2007 The Globe and Mail. All rights reserved.

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