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Canadian bank headquarters stand on Bay Street in Toronto Aug. 29, 2011.Brent Lewin/Bloomberg

A rebound in commodity prices has taken a toll on the performance of Canadian large-cap investment managers.

According to a quarterly survey by Russell Investment Canada Ltd., released Thursday, only 41 per cent of managers beat the S&P/TSX composite index benchmark in the first quarter of 2016, down from 82 per cent in the fourth quarter of 2015.

The median return for managers during that period was 4 per cent, compared to a 4.5-per-cent increase in the index.

"The strong market rebound at the end of the first quarter, particularly in the energy sector and among gold stocks, made it difficult for most managers surveyed to beat the benchmark," said Kathleen Wylie, head of Canadian equity research at Russell Investments Canada, in a release. "Gold stocks surged a record 39 per cent in the quarter, and even though large-cap managers are only 2 per cent underweight, it still hurt their benchmark-relative performance because of the magnitude of the increase. Renewed strength in energy stocks also added to the challenges since large-cap managers on average are about 3 per cent underweight."

Dividend managers proved to be the quarter's most successful group, logging a median return of 5.5 per cent. Sixty-seven per cent of the group beat the benchmark.

Value managers (4.1 per cent) and growth managers (2.6 per cent) both failed to reach the standard. Only 44 per cent of value managers and 17 per cent of growth managers outperformed the TSX.

"On average, large-cap managers in Canada were underweight the banks heading into the quarter because they are such a large weight in the index at 23 per cent," said Ms. Wylie. "But dividend managers have the smallest underweight at less than 3 per cent compared to 8 per cent underweight on average for value managers and nearly 6 per cent for growth."

The report suggests the second quarter could also prove to be difficult, despite a 3.7-per-cent rebound in the TSX in April. It pointed to the impact of a "more narrow" sector breadth, with only three of the index's 10 sectors finishing above the benchmark.

"It's not looking like a great start to the second quarter for active managers in terms of beating the benchmark," said Ms. Wylie."But the situation can change quickly. Early indications show a tilt back toward growth managers due to their more favourable positioning in the top three performing sectors. As well, defensive sectors underperformed in April after strong performance in the first quarter, so that will certainly work against dividend managers, who were in the lead in the first quarter."

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