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Looking for market-beating U.S. funds

What are we looking for?

U.S. equity funds have been a popular choice among investors in the last year - how have these top performers measured up, compared to the market index?

The screen

We looked for the 15 best-performing U.S. equity funds traded in Canada this year to July 31. U.S. dollar, duplicated, segregated and pooled funds were excluded. We paid close attention to the S&P 500 Composite, in Canadian dollar terms.

What did we find?

All 15 funds are outperforming the S&P 500 by a mile in the past year, with the Brandes U.S. Equity Fund leading with a 41.6 per cent return in the period. And the fund has made great gains recently: When we looked at this fund five months ago, it had a one-year return of 18.6 per cent.

In fact, Brandes's fellow U.S. equity funds have all posted annualized returns of at least 33 per cent, compared to the S&P 500 Composite Total Return index's 28.4 per cent.

And the appetite for U.S. equity funds has been strong in Canada. This fund category posted net sales of $947-million in July, similar to June's figures. Last month they were the second-best selling category after Global Neutral Balanced funds.

American investors have also poured more money into U.S. equity mutual and exchange-traded funds, data from Lipper suggest. They were less enthusiastic about emerging-market investments. According to Bloomberg data, U.S. equity ETF net inflows in July were the highest in nearly five years, while emerging-market ETFs have seen net outflows.

Right now, the Brandes fund has more than 10 per cent of its investments weighted in cash and cash equivalents, but major corporate stock holdings include software giant Microsoft Corp.

The screen's second-best performer, the PowerShares S&P 500 High Beta (CAD Hedged) Index ETF similarly has close to a quarter of its portfolio weighted toward the information and technology sector, holding companies such as semiconductor-maker Micron Technology Inc.

But don't count out other funds - in the calendar year 2012, the Canadian hedged iShares U.S. Fundamental Index ETF was the top performer in the screen.



FundTicker1-yr % chg (July 31)3-yr % chg (July 31)5-yr % chg (July 31)10-yr % chg (July 31)2012 % rtn2011 % rtn2010 % rtn2009 % rtn2008 % rtnMERAssets ($-mil)
Brandes U.S. Equity41.617.75.1-0.713.5-0.37.616.9-46.02.6690.0
PowrShars S&P 500 Hi Beta (CAD Hdg) ETFUHB-T39.4--------0.383.1
Counsel U.S. Value A38.713.1--12.0-8.79.0--2.6414.9
DFA U.S. Vector Equity A38.217.07.1-14.6-3.514.814.1-32.21.6817.3
iShares US Fundament Idx-C$Hgd Com ETFCLU-T36.618.58.3-20.1-1.516.728.5-42.60.72180.9
RBC O'Shaughnessy U.S. Value36.,339.6
Norrep US Dividend Plus Class-A35.615.08.5-17.8-12.322.56.3-19.02.976.5
Beutel Goodman American Equity-D35.417.
Investors U.S. Opportunities-A34.916.
Franklin US Core Equity-A34.711.37.6-4.1-
Standard Life US Equity Value-A33.916.56.12.512.
Mawer U.S. Equity33.817.
DFA U.S. Core Equity A33.216.37.1-13.0-1.611.79.6-25.31.5691.2
Manulife U.S. Equity Fund33.116.1--
Quadrus London Capital US Value33.014.24.0-4.1-
S&P 500 Composit Totl Retrn Idx ($Cdn)28.417.78.34.313.
S&P/TSX Total Return10.
MSCI North America Index ($ Cdn)
Source: Lipper

© 2007 The Globe and Mail. All rights reserved.

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