Briefly:

Previous Brieflies this week: | MON | TUE | WED | THU |

For the third consecutive quarter, Canadian small cap managers outperformed large cap managers, according to the latest Russell Active Manager Report. The median small cap manager return of 19.5% in the third quarter of 2009 was more than 9% ahead of the median large cap manager return of 10.2%.

“This was the strongest out performance of small cap managers relative to large cap since Russell Investments has been collecting this data, which began in 1988. It’s not a huge surprise given how strong small cap stocks performed during the quarter,” says Kathleen Wylie, senior research analyst at Russell Investments Canada Limited.

The S&P/TSX Small Cap Index returned 21.9% in the third quarter, more than double the return of the broader S&P/TSX Composite Index return of 10.6%.

“On average, small cap managers had 20% of their portfolio in Materials stocks compared to an average of 13% for large cap managers” says Wylie. The Materials sector outperformed in both the S&P/TSX Composite Index and the S&P/TSX Small Cap Index in the third quarter.

“However, it’s important to point out that the composition of the S&P/TSX Small Cap Index is very different than the S&P/TSX Composite Index. Materials stocks account for 28% of the small cap index weight compared to 18% in the broader S&P/TSX Composite Index. Small cap managers were almost 8% underweight Materials relative to the S&P/TSX Small Cap Index, which made it difficult for small cap managers to outperform their benchmark.”

The study also found the majority of large cap managers lagged the index, only 41% of large cap managers were able to beat the S&P/TSX Composite Index in the third quarter of 2009, compared to the 38% of large cap managers that outperformed the S&P/TSX index in the second quarter.

“The trend is improving in terms of benchmark relative performance for large cap managers. However, it has been a challenging year, due in large part to narrow sector performance. Over the long run, active managers have outperformed the benchmark on average by almost 30 basis points per quarter,” says Wylie. “Only 4 out of 10 sectors beat the S&P/TSX Composite Index return in the third quarter: Health Care, Financials, Materials, and Industrials.

• • •

HSBC launches Indian equity fund

HSBC Investment Funds has launched the HSBC Indian Equity Fund, a mutual fund which will attempt to derive returns based on the performance of India.

HSBC says India been the second fastest growing economy in the world, after China, for the last 10 years and is predicted to become one of the world’s largest economies by 2040.

“High growth emerging markets offer exciting investment possibilities. In India, unlike many other emerging economies, personal consumption makes up a large proportion of GDP, and exports today account for only 15% of the economy, So India is well positioned to generate homegrown economic growth and less dependent on other economies,” says MarcCevey, CEO of HSBC Investment Funds.

The Fund follows a disciplined investment philosophy targeting long-term capital appreciation using a diversified equity portfolio. The Asia-based portfolio management team will target key sectors and companies that it believes will benefit from India’s rapid economic expansion.

• • •

Fidelity funds institutes fixed rate

Fidelity Investments Canada, says it’s mutual fund investors have approved a proposal to change the basis of charging operating expenses to funds to a fixed rate administration fee

Fidelity fund investors have voted in favour of its proposal to replace operating expenses with fixed rate administration fees. The change to fixed rate administration fees will be effective as of November 1, 2009.

(10/28/09)