Picking year’s best fund performers
Each year, co-author Eric Kirzner and I do our analysis for the annual Buyer’s Guide to Mutual Funds. We select the top performers for the past 12 months in various categories.
These should help provide insights as to where to look for above-average investing returns. So here’s a run-down on some of our top choices for this year.
This fund hasn’t been the powerhouse performer in recent months that it was in 2000, but it beat the indexes handily and remains in the first quartile of its category.
The fund is managed out of San Diego by the Charles Brandes organization. Brandes is a disciple of the late Dr. Benjamin Graham (he once worked briefly with him) and has written two books on the value discipline.
His philosophy guides the fund, although associate Chris Richey handles day-to-day management.
This fund gained 1.8 per cent over the year to September 30th and shows a three-year average annual compound rate of return of 18.3 per cent over that time. That’s outstanding, given what has happened to the rkets.
What is especially impressive is the dependability this fund has shown over the years. It produced double-digit profits for investors every single calendar year after the Brandes organization took it over in late 1994. That’s a run of six straight, from 1995 to 2000.
It’s not going to make it seven straight this year, but we look for it to be right back near the top in 2002. The basic philosophy here is to preserve capital in bad times and outperform in good times. The fund has certainly done that.
Good mutual fund managers don’t have to operate from Toronto’s Bay Street, and here’s an example.
Peter Marshall works in relative obscurity from his Halifax base, but the results of his efforts have been making investors smile. He’s the chairman and CEO of Seamark Asset Management and in that capacity he oversees the running of accounts worth more than $6 billion.
Although it’s just a small part of that business, the outstanding results Marshall has achieved managing money for the Clarington funds is the reason why we’ve chosen him as our Manager of the Year.
He and his Seamark team have been the main force in raising the Clarington brand image in the minds of many investors.
His conservatively-run Clarington Canadian Equity Fund has been a top performer in the
Canadian Large Cap category in recent years. It has posted an average annual return of 17.5 per cent over the three years to the end of September.
His Clarington Canadian Balanced Fund is also first-rate, with a three-year annual return of 11.1 per cent.
The Clarington Canadian Income Fund delivers a steady monthly income stream with some tax advantages as a bonus. It has never lost money over a calendar year since its launch in 1996. It’s going to have to work a bit in the next two months to keep that record intact in 2001. (It was down 2 per cent year-to-date as of mid-October.)
Marshall also oversees the new Clarington Canadian Dividend Fund and the Clarington Global Income Fund.
Next page: Comeback of the year
Mackenzie Financial became the giant it is today on the strength of its Industrial Group of Funds.
Back in the 1980s, when the fund industry first began to emerge as a viable option for Canadian investors, the Industrial funds were the leaders of the pack. Industrial Growth became the biggest domestic fund in the country for a period of time.
Industrial Horizon was the first major fund to offer a deferred sales charge option (back-end load), which made it an almost instant hit among both advisors and their clients.
But in the 1990s, the Industrial funds fell on hard times. The management team placed big bets on the resource sector, which never paid off. Returns drifted down and Mackenzie began to lose market share.
Industrial Growth was especially weak. The fund lost more than three-quarters of its asset base as investors cashed in and moved on. Things weren’t much better elsewhere in the family.
But now, after a decade-long hiatus, the Industrial funds are back. A revamped management team, headed by veteran Bill Procter, has restored the line to respectability. The funds turned in some very good results in the weak markets of 2000-01.
Procter’s Industrial Horizon Fund has been a first quartile performer in the past two years. So have Industrial Income and Industrial Pension. Industrial Balanced has also been above average.
Beleaguered Industrial Growth is not only back in the first quartile, but it had posted a year-to-date gain of 18.4 per cent to mid-October, which is amazing given the circumstances.
Those investors who hung on through thick and thin (mostly thin) must have rubbed their eyes in wonder when their statements arrived. Put it all together, and it’s a remarkable turnaround. Now we have to hope that it can continue.
Next page: Surprise of the year
Mutual fund ads are always required to point out that past results are not indicative of future returns. The implication of the warning is not to expect a fund that gained 25 per cent last year to do a repeat performance.
But it works both ways. Occasionally a fund with a long history of mediocrity can rise up and post some eye-popping gains. This one is an example.
Except for a brief spurt in 1996, it has been an underachiever for most of the past decade. Its long-term record still ranks well down on the list in the Canadian Equity category. But the collapse of the technology markets and the return to value investing translated into a resurrection for this shopworn entry.
The fund gained almost 5 per cent in the year to September 30. This is an excellent performance at a time when most Canadian stock funds were losing ground. New manager Dom Grestoni obviously gets a lot of the credit for this resurgence.
This wasn’t the number one performer over the past 12 months. But no one is going to be unhappy with the 16.8 per cent profit this fund produced in the year to September 30.
It’s a relative newcomer, launched in 1998, but has shown steady improvement every year. Most of the Trimark funds struggled in the late’90s, but this was a notable exception. Now, the Trimark entries are looking much better, but this one really stands out from the crowd.
This was a year when cautious and conservative won the race. This relatively new dividend fund from Canada Life is an example.
Manager Philip Wootten of Laketon Investment used a deft mixture of common and preferred shares to fashion a portfolio that topped the list in its category over the latest 12-month period. The gain is 15.3 per cent.
He also runs Canada Life’s new “Generations” version of the same fund.
From the November 2001 edition of Mutual Funds Update