Pooled funds hit hard in Q4 2008

Even the best investors got whacked by the markets in the final quarter of 2008. Over 80% of Canadian institutional pooled funds tracked by Morningstar Research posted negative returns in Q4.

Of the 572 equity funds in the Morningstar universe, only six had positive returns over the last three months of 2008. There are 23 equity-based categories, of which 17 had median losses in excess of 10%.

Canadian Equity pooled funds were the hardest hit among the broad categories, with a median decline of 22.1%. The Canadian Focused Equity category saw a median loss of 17.6%, while the Emerging Markets Equity group fell 17.9%.

European Equity, U.S. Equity and Global Equity categories had median losses of 11.6%, 10.4% and 9.3%, respectively. The Japanese Equity group fared the best, with a median loss of just 4.6%.

Among the more narrowly focused pooled funds, Natural Resources took the worst beating, with a median loss of 26.3% for the category, while the Canadian Small/Mid Cap Equity group fell 22.2%.

Morningstar tracks 41 distinct pooled fund categories, of which six posted positive median returns. Not surprisingly, government fixed income investments figured prominently in the list of winners.

The Canadian Long Term Fixed Income group had a median return of 4.6%, making it the best group for the quarter. Global Fixed Income was not far behind with a median return of 4.4%.

As investors flew to safety, the Precious Metals Equity group — if a category with a single fund can be called a group — gained 4.3%.

The Canadian Fixed Income group posted a median return of 3.5%, while Canadian Short Term Fixed Income was up 2.5%.

The Canadian Inflation Protected Fixed Income and High Yield Fixed Income groups had median losses of 0.5% and 3.1%, respectively.

On an individual basis, the best performing pooled fund was SEI Enhanced Global Bond, with a whopping 29.6% gain in the fourth quarter.

United Global Fixed Income Pool earned 28.4%, while TD Emerald Global Government Bond Index gained 26.2%.

Among equity funds, the top performer was Burgundy Asian with a 21.5% gain, followed by Goodman Precious Metals Equity, up 4.3%.

The worst performer title was RBC Private O’Shaughnessy U.S. Growth Equity Pool, with a loss of 39.9%.

Burgundy Asset Management was the top-ranked manager, with seven of its 15 funds being five-star rated. Mawer Investment Management has five five-star funds, while Industrial Alliance Insurance and Financial Services has four top-rated funds.

(01/23/09)