What we're looking for
Duds in the Canadian equity fund categories.
The point of taking on risk in investing is that you put yourself in position to reap better returns than you'd get from keeping your money safe. Like, say, in money market funds, where your money isn't guaranteed but remains insulated from stock and bond market volatility. By this logic, a dud equity fund would be one that makes you less over the long term than the average Canadian money market fund.
What follows is a list of the biggest funds in the Canadian equity categories with returns that were equal to or less than the average money market fund over the 10 years to July 31, which was 2.6 per cent. To show how a fund is doing lately, we have also included quartile rankings for the past 12 months. Quartiles divide funds in a category into four groups according to their returns - first quartile is best, fourth is worst.
What we found
Some names you might expect, like AIC Advantage, and some you probably wouldn't expect, like PH&N Growth. Once a high flier, AIC Advantage was loaded with the kind of financial stocks that were annihilated in 2007-08. The fund has surged lately thanks to rebounding bank stocks, but an investment in it over the past decade was essentially dead money.
PH&N Canadian Growth is supposed to be a Canadian equity fund you can buy and forget because of its conservative management and low fees. But the fund's 10-year return of 2.6 per cent is well below the peer average of 4.9 per cent over the past decade (the S&P/TSX composite made 6.5 per cent). Also, the fund lost 38.3 per cent in 2008, which is just over 7.5 percentage points worse than average.
Mackenzie Ivy Canadian is an interesting case because it's a conservatively run fund that protects investors laudably well in down markets - down 15.8 per cent last year - but lies there like a plate of warm beer when stocks are rising fast.