‘Timing is key’: Supercycle effects still loom over long-term fund returns – by Olev Edur (Financial Post – February 15, 2017)


Looking at the latest 15-year fund performance figures, you’d think that Canadian equities are absolutely the best investments in the world, especially the small and mid caps. Resource and precious metal funds, despite ongoing commodity headwinds, don’t look too shabby either.

Those were among the top-performing categories in the Canadian mutual fund universe for the 15-year period ended Dec. 31, 2016, according to data provided by Fundata Canada Inc. Real estate equities (a small category comprising just three funds with 15-year track records) and energy equity funds rounded out the Top 5, even though oil prices now hover around the US$50 per barrel mark. Canadian dividend/income equity funds held sixth place in terms of 15-year performance.

The implications of Table 2 (below), which lists the Top 15 out of 28 total funds that achieved double-digit 15-year returns through 2016, are even more dramatic: The vast majority of these funds were Canadian equities and most were also in the small/mid-cap space. By comparison, not a single foreign fund of any kind achieved double-digits (most came nowhere close, although those resource and precious metals funds do hold varying degrees of foreign content).

So, is Canada really that hot of an investment mecca that our funds are the strongest in the world? If the U.S. markets have indeed been booming lately, why have Canadian returns from U.S. equity funds averaged a paltry 2.8 per cent annually over the past 15 years? And what about small/mid-caps — how do these funds manage to consistently outperform in such a crowded and risk-prone sector? Is it currency? Better companies? Or just plain luck?

None of the above, according to fund executives contacted by the Financial Post. “It’s all about resources,” says Drummond Brodeur, senior vice-president and global strategist with Signature Asset Management (a division of CI Investments) in Toronto. “The Canadian economy is indistinguishable from resource markets.

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