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A general view shows a shipping container area at Yangshan Port in Shanghai, in this May 11, 2012 file picture. China's inflation, industrial output and retail sales all flagged in May for a second straight month of sluggish growth. (ALY SONG/Reuters)
A general view shows a shipping container area at Yangshan Port in Shanghai, in this May 11, 2012 file picture. China's inflation, industrial output and retail sales all flagged in May for a second straight month of sluggish growth. (ALY SONG/Reuters)

Number Cruncher

For resource-heavy funds, a May to forget Add to ...

What are we looking for?

Funds hit the hardest in May.

It was a volatile month for stock markets, lending more credence to the folksy truism that investors should “sell in May and go away.”

The screen

We looked for the biggest losers during May. U.S. dollar, segregated, pooled, alternative strategy and duplicate versions of funds were excluded.

More Related to this Story

What did we find?

A case of déjà vu.

Like last year, many resource-heavy and smaller-cap funds were hurt in May.

Concerns about slower economic growth, particularly in resource-hungry China, and investors’ loss of appetite for riskier investments played havoc with the funds’ returns.

Among mutual funds, Creststreet Alternative Energy and Creststreet Resource lost the most, respectively, shedding 23.4 per cent and 18.8 per cent.

Creststreet’s smaller-cap resource fund was affected by heightened concern that China’s economy is heading for a hard landing, but “we actually think [the Chinese] are doing a good job of engineering a soft landing,” said Robert Toole, chief investment officer at Creststreet Asset Management Ltd. “The junior resource sector had a very difficult month.”

On the other hand, the performance of the Creststreet’s alternative energy fund has largely been affected by an oversupply of natural gas in North America, Mr. Toole suggested. “Because natural gas is at such a low price right now, that makes higher-cost, renewable energy power production relatively less competitive.”

Among exchange-traded funds, BMO S&P/TSX Equal Weight Global Base Metals ETF declined the most with a 19.7-per-cent loss. “Base metals are very sensitive to global growth expectations,” said Mark Raes, an ETF portfolio manager at BMO Global Asset Management. “The combination of slowing growth in China and India, the escalating European debt crisis and a poor U.S. jobs report [recently] has negatively impacted this asset class.”

Because the ETF hedges part of its U.S. dollar exposure, the rise in the value of the American greenback also negatively affected the fund, he said.

Despite the red ink in many funds, bargain-hunting investors might consider the recent downturn as a buying opportunity. The biggest losers could potentially be among the biggest gainers in a strong market rebound.

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Biggest losers in May, 2012

Fund Category MER Assets as at April 30 ($ mil.) 1 month to May 31 YTD to May 31 Calendar year returns 2011
Creststreet Alternative Energy Misc./Undisclosed Holdings n/a n/a -23.42% -24.53% -30.83%
BMO S&P/TSX EW Gbl Base Metals ETF Natural Resources Equity 0.58 51.4 -19.73% -19.83% -32.88%
Creststreet Resource Misc./Undisclosed Holdings 3.44 n/a -18.80% -23.24% -31.45%
Qwest Energy Canadian Resource Cl A Natural Resources Equity 4.09 25.2 -16.69% -19.93% -42.00%
Terra Small Cap Resource-R Natural Resources Equity n/a n/a -16.02% -13.94% -29.65%
Marquest Resource Natural Resources Equity n/a n/a -15.90% -13.14% -23.91%
AlphaNorth Growth Fund Series A Cdn. Small/Mid Cap Equity n/a n/a -15.87% -13.60%
Redwood Global Small Cap Global Small/Mid Cap Equity 3.11 n/a -15.86% -11.49% -37.09%
FrontierAlt Resource Capital Cl-A Natural Resources Equity n/a 1.9 -15.48% -18.89% -46.38%
Front Street Small Cap CC-A Miscellaneous - Other 6.33 13.2 -14.89% -25.58% -27.86%

Source: Lipper

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