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Canadian mutual funds lag index, again Add to ...

The latest scorecard for mutual fund performance during the first quarter is out, which again makes for interesting reading. Standard & Poor's found that only 40 per cent of actively managed Canadian equity mutual funds beat the S&P/TSX composite index, and the longer the time horizon, the worse the beat-rate.

Over three years, just 10.9 per cent of funds beat the benchmark index. Over five years, a mere 3.3 per cent of funds beat the index. The S&P approach corrects for survivorship bias, essentially taking into account funds that shut down.

In the first quarter, the S&P/TSX composite index rose 2.5 per cent, but the moves by subindexes were far more dramatic - meaning that beating the index meant concentrating your bets on at least one of the winning groups of stocks.

Energy didn't cut it: The group actually fell 2.7 per cent. Therefore, any fund manager that made a big bet here was doomed to lag the benchmark index.

On the other hand, financials rose 7.1 per cent, information technology stocks rose 6 per cent, industrials rose 5.7 per cent and telecom services rose 4.3 per cent. It appears that relatively few mutual funds bet big on these stocks though.


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