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What are we looking for?

Biggest money losers among Canadian-listed exchange traded funds (ETFs) in 2012.

The screen

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We searched for the worst-performing ETFs in all fund categories. U.S.-dollar ETFs were excluded, as were leveraged ETFs, which can amplify long and short bets, and those funds that "short" or make bets against a sector.

What did we find?

Gold stock ETFs losing plenty of glitter once again.

The worst performers were the iShares S&P/TSX Global Gold ETF, down 18.5 per cent, and BMO Junior Gold ETF, off 16.8 per cent. These equity ETFs struggled as the spot price for gold rose nearly 6 per cent last year.

"Gold stocks do not usually follow the price of gold closely," said Chris McHaney, an ETF portfolio manager with BMO Global Asset Management. "Equities tend to lag price changes in gold, as investors wait to see if any significant price change will be maintained longer term."

Junior gold stocks were also hurt by the "risk-off" mentality that overshadowed stock markets because of headlines about Europe's debt crisis early in the year, and "fiscal cliff" issues in the United States closer to year-end, he said. "A few companies in the industry faced operational issues in 2012, but the majority of the [BMO ETF] performance was simply due to investor sentiment." Big losers included names such as Grand Basin Gold, Jaguar Mining and Kirkland Lake Gold.

Larger gold companies generally had a "tough year due primarily to rising costs of production and decling profit margins, said Jeff Logan, head of iShares products at BlackRock Asset Management Canada Ltd. The biggest contributors to the iShares ETF loss were names such as Barrick Gold Corp., Goldcorp Inc. and Newmont Mining because of their larger weightings.

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Last year was the second consecutive year of losses for both ETFs. The red ink between them narrowed last year compared with 2011 when BMO Junior Gold suffered a much bigger loss. "In 2010, small-cap gold stocks enjoyed a strong rally," Mr. McHaney said. "When the market turned down in 2011, small-caps fell further because they had risen higher previously." In 2010, BMO Junior Gold ETF rose nearly 72 per cent from its launch on Jan. 25 to the end of the year versus 34 per cent for the iShares ETF.

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