What are we looking for?
Top index beaters among Canadian stock funds over the past year. Let's see who has outwitted the benchmark in the recent roller-coaster ride.
We screened three categories of Canadian large-cap stock funds to see who beat the 17-per-cent return by S&P/TSX Total Return Index for the year ended May 31. Pooled, segregated, U.S. dollar and duplicate versions of the funds were excluded.
What did we find?
PH&N Canadian Income Fund at the top of the chart, with a 31.4-per-cent gain. This Canadian dividend and income fund was trailed closely by EdgePoint Canadian Portfolio, up 30.6 per cent, and Premiere Stable Growth, up 30 per cent. They were among more tan 80 actively managed funds that beat the index.
Scott Lysakowski, manager of PH&N Canadian Income, attributed much of his fund's performance to the low interest-rate environment that is driving yield-hungry investors to seek dividend-paying stocks or income trusts with distributions.
He reduced his weighting in banks, which led the rebound from the bottom in March, 2009, to increase his exposure last fall to real estate investment trusts and oil and gas trusts that later rallied. Big gainers included names such as Brookfield Renewable Power, Bonavista Energy Trust, and Labrador Iron Ore Royalty Income Fund.
While he sees the North American economy in the early stages of a recovery, he expects a "sideways movement" in the market over the next 6 to 12 months. It is still possible to make money, but "in a directionless market, returns will come from dividends," he said. "Toward the latter part of this year and into next year, I think the banks will return to become dividend growers."
Strategies among the index beaters vary widely. While the PH&N fund is nearly fully invested, Sentry Select Diversified Total Return, which gained 26.9 per cent over the past year, is now sitting 50 per cent in cash. Said manager Andrew McCreath: "I believe the market can continue to pull back."