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Mutual Fund News

Small-cap funds, big-picture themes

jnelson@globeandmail.com

What are we looking for?

Where funds that focus on smaller companies found opportunity in the past year.

Today's search

We screened three fund categories focused on smaller companies for the top 15 performers. This included the Canadian and Canadian-focused small- to mid-cap categories, as well at the U.S. small- to mid-cap category. We looked at the one year ended Feb. 28. U.S.-dollar, segregated, pooled, duplicate funds were excluded, as were those with minimum investments of more than $25,000.

What did we find?

Big-picture themes drove performance. The Mawer New Canada Class A fund was the top performer with gains of 47.5 per cent in the year to Feb. 28. The BMO Enterprise Fund, which is also managed by Mawer with a similar strategy, came second with an annualized gain of 46.4 per cent.

Part of the success for Mawer and BMO came from avoiding problematic areas of the market, said Martin Ferguson, who is the lead portfolio manager for both funds.

The concerns over the end of monetary stimulus in the United States caused reactions in the market, inducing a rise in interest rates, Mr. Ferguson said. That hurt the performance of utilities, real estate and other interest-rate-sensitive corners of the markets.

The second big theme was the plunge in gold prices, he said, noting that gold stocks in BMO Nesbitt Burns Canadian Small Cap Index fell by an average of 47 per cent, on a weighted basis, last year. "In a year where the industry got decimated, we did well by having no exposure to that."

Instead, Mr. Ferguson focused on stock selection in other areas. One holding, Paladin Labs Inc., scored big when it was the subject of a takeover bid.

While Mr. Ferguson's products are closed to new investors, many funds in this category will invest around the same major themes. The threat of reduced stimulus and higher interest rates will persist.

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TOP 15 SMALL OR MID CAP EQUITY FUNDS

Assets% Return to Feb. 28, 2014% Return
FundMER%(in $mil.)1 year3 years5 years10 years2013201220112010
Mawer New Canada Class A1.411266.347.45%19.56%30.97%15.02%49.42%16.36%1.09%23.91%
BMO Enterprise Fund - Classic2.22345.246.42%18.87%30.42%12.47%48.50%15.58%-0.52%25.92%
Fidelity Special Situations B2.28377.545.20%14.15%27.40%41.43%16.95%-15.65%25.26%
HSBC Small Cap Growth-I2.33224.843.66%17.87%29.69%11.63%45.94%15.35%-0.77%24.65%
CIBC U.S. Small Companies2.7946.742.26%18.17%19.71%3.38%50.66%13.94%-7.20%18.49%
ROI Cdn Top 30 SmCp Picks SrC71.45m4.041.67%9.08%23.78%38.17%0.48%-5.80%34.78%
Cambridge Pure Cdn Equity A2.4866.741.59%27.95%47.29%34.26%
Fidelity Small-Cap America-B2.33495.541.42%26.87%29.14%7.79%54.15%19.85%7.71%18.87%
Stone & Co. Growth Industries A3.231.541.19%10.05%17.36%2.85%46.47%-1.25%-7.66%0.00%
TD U.S. Mid-Cap Growth2.55725.340.62%17.73%22.29%7.58%43.82%9.64%-0.55%20.15%
AGF US Small-Mid Cap MF Series2.66221.638.56%14.63%17.27%7.08%42.04%6.79%-0.40%17.89%
TD US Small-Cap Equity Inv Srs2.56142.338.54%20.13%25.28%7.43%45.78%13.90%1.05%24.10%
Manulife Special Opport Class2.6820.738.19%37.76%37.97%
FT Bissett Microcap-F2.4292.337.96%17.36%35.19%14.80%39.77%26.81%-0.37%55.92%
Standard Life Cdn Small Cap-A2.63113.337.24%2.62%17.01%6.57%31.57%4.05%-22.02%19.51%
S&P/TSX Small Cap Total Return16.40%-2.79%17.44%7.60%-2.23%-16.43%35.10%
BMO Nesbitt Burns Cdn Small Cap Index17.01%0.21%21.09%7.18%7.76%2.46%-14.17%38.53%
S&P 500 Composite Total Return Idx($Cdn)31.94%18.45%19.09%4.95%38.43%13.48%4.41%9.34%
MSCI North America Index ($ Cdn)33.73%17.95%19.33%5.41%39.13%13.01%3.04%9.93%
Note: "m" stands for "maximum" (it's a new fund). Source: Lipper. Data compiled by: Wei Sun

© 2007 The Globe and Mail. All rights reserved.

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