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Fund Cruncher

Fund performance: A tale of two time periods Add to ...

What are we looking for?

How the biggest Canadian stock funds have fared over the longer haul.

The search

We screened the 15 largest funds by assets in three categories: Canadian equity, Canadian focused equity (which can invest up to 50 per cent in foreign stocks) and Canadian dividend and income equity. We ranked them by five-year returns, and then compared them over 10 years. U.S. dollar, segregated, pooled and duplicate versions of the funds were excluded.

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What did we find?

The iShares CDN Large Cap 60 exchange-traded fund was the leader over five years with an annualized return of 6.3 per cent.

But this same ETF, which invests in the 60 largest stocks in the S&P/TSX composite index, lagged all the other funds with an annualized return of 2.9 per cent over 10 years.

So what gives?

With about 45 per cent currently invested in energy and materials stocks, the ETF has certainly benefited from the boom in commodity stocks in recent years.

The iShares ETF, which has a management expense ratio of 0.17 per cent, would also be expected to outperform "because our fees are lower than most mutual funds," said Oliver McMahon, director of product management for iShares Canada.

Over a decade, the ETF's trailing performance might be due to the fact that smaller-cap companies have done better than larger companies, while "over the last five years, large-cap stocks have outperformed small-cap stocks," Mr. McMahon said.

"We would only ever hold Canadian stocks," he said. "If a manager gets lucky with a foreign stock or a [smaller cap]Canadian stock, then that is going to add value."

CI Signature Select Canadian, which is run by Eric Bushell of CI Financial Corp., only had 49 per cent of his fund in Canadian stocks at the end of June. It came second with an annualized return of 5 per cent over five years, but outpaced the iShares ETF with an annual 8-per-cent gain over 10 years.

The iShares ETF may be cheap, but there are no guarantees it will be the best over the long haul.

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