Cover

THE BEST AND WORST MUTUAL FUNDS

After another ugly year, investors are scaling back,

KATHERINE MACKLEM February 3 2003
Cover

THE BEST AND WORST MUTUAL FUNDS

After another ugly year, investors are scaling back,

KATHERINE MACKLEM February 3 2003

THE BEST AND WORST MUTUAL FUNDS

Cover

After another ugly year, investors are scaling back,

KATHERINE MACKLEM

WHEN SEAN MAGUIRE inherited some money in 1997, he knew “nothing” about investing. The 42-year-old Coquitlam, B.C., resident sought advice from four or five investment advisers, but came away disappointed each time. So Maguire, a project manager with a tech company in Vancouver, took the certified financial planners course, an intensive, two-year program—not for a career change, but to learn how to manage his own investments and plan for his retirement. “I didn’t want to pay for bad advice,” he says.

Many other Canadian investors can sympathize. Whatever kind of advice they got, a lot lost money in 2002. “Last year was an unusual year because the economy just didn’t matter,” says Stephen Maclnnis, chief investment office for HSBC Asset Management Canada Ltd. While the Canadian economy was “stellar,” he notes, the stock market declined 14 per cent, down for the second year in a row. In the U.S., despite a “pretty good” economy last year, the markets destroyed 23 per cent of their market capitalization. Coming on the heels of the two previous years of market mayhem, 2002’s poor showing was particularly harsh. From its peak on Sept. 1,2000, the Toronto Stock Exchange’s index had plummeted 42 per cent by year’s end. Canadian RRSP holders had already lowered their expectations, telling pollsters last year they hoped to achieve a nine-per-cent return. Instead, mutual fund

assets, where the bulk of RRSP money resides, fell seven per cent over the year—the second year those assets have declined. According to Morningstar Research Inc., the Torontobased arm of investment data giant Morningstar Inc. of Chicago, $494.6 billion was invested in mutual funds in Canada, a figure that has shrunk by almost 20 per cent from 2000’s peak of $611.6 billion.

The decline wasn’t simply due to lousy markets. During the last nine months of 2002, Canadians withdrew more money

from mutual funds than they put in—a record redemption binge, according to stats from the Investment Funds Institute of Canada. As it turns out, the full year saw more money invested than withdrawn, with the strong RRSP months of January and February tipping the balance. Still, the $3.4 billion that Canadians put into mutual funds last year, as tracked by IFIC, was the lowest the organization has recorded since 1990, and 88 per cent lower than the 2001 contributions of $29 billion. “Ugly stuff or what?” says

THE YEAR’S WINNERS AND LOSERS

Biggest gains and losses in 2002 among all funds

FUND NAME TOP Royal Precious Metals_Precious Sprott Gold and Precious Minerals AGF Precious Metals_Precious Mac Universal Precious BMP Precious Metals_Precious Altamira Precious & Strategic Metals Dynamic Canadian Precious Metals London Life Prec Metals (MAXXUM) TD Precious Metals -1_Precious Sprott Hedge Fund L.P._Alternative

TYPE PERFORMANCE (%) 10_ metals_153.1 Precious metals_116.2 metals_103.8 metals_89.7 metals_85.1 Precious metals_83.3 Precious metals_81.7 Precious metals_80.1 metals_74.3 strategies_74.0

BOTTOM Mavrix Growth_Cdn ING Global Technology_Science Mavrix Enterprise_U.S. ¡Units S&P/TSX Cdn Information Tech ING Global Communications

5_ small cap equity_-52.5 and technology -54.0 equity_-59.0 Science and technology -59.1 Science and technology -62.0

Michael Manford, chief capital markets strategist for Canaccord Capital Corp. “There’s little doubt that 2002 was a little too interesting a year.”

Vancouver’s Maguire, too, lost money in 2002—about six per cent. Yet he’s not fazed— and the losses have left nary a dent in his strategy to invest wholly in equities, a plan many consider risky. Eschewing the standard advice to diversify, Maguire settled on just two mutual funds, one in Canadians stocks, the other in U.S. “I had to convince my investment rep I didn’t want lots of funds,” he says. The two he chose are managed by Jim O’Shaughnessy, of Bear Stearns Asset Management Inc., and are named for him and the quantitative analysis strategy he champions. The funds, balancing high-yield large companies with cheaper growing ones, are hardly flashy. “The fund’s approach,” says an O’Shaughnessy commentary, “will, as al-

ways, remain boring, predictable and, we believe, quite successful.” Maguire bought the funds early in 1999 for three different RRSP accounts: a regular account and a locked-in one for himself, and a spousal account for his wife. Annualized, the accounts have provided a return of about nine per cent. Invested for the long haul, Maguire says he might re-balance the portfolio when he reaches 50 and put 10 to 15 per cent into a more secure, non-equity investment. In the meantime, the self-described “calm and optimistic” Maguire says, “I can’t see myself withdrawing this. Because I’m happy with the vehicles I’ve chosen, I just let them go.”

MACLEAN’S MORNINGS!'

Even though he lost money last year, Maguire has contributed the maximum he can for 2002, which is limited by Ottawa to 18 per cent of earned income up to a ceiling of $13,500. Government sources last week leaked suggestions that Finance Minister John Manley may bump up the limit to $21,000. “I’d take full advantage,” says Maguire. “I’d like to see the limits raised.” Maclean’s annual mutual fund ranking, compiled by Morningstar, is designed to help investors make choices that they, like Maguire, are comfortable with. The tables on these pages offer the best and worst funds in eight selected categories based on three important measures: the annual compound return over the last three years, longer-term performance over a succession of three-year periods, and a special Morningstar risk/retum score. This year, all funds in the longer-term performance tables must have been around

at least five years—when our usual standard of three years was used, the bad markets since 2000 skewed the results so that nearly all of the worst, and a sixth of the best, were young funds. In addition, there is the Maclean’s Hot 100, a best-of-class listing compiled exclusively for the magazine by Morningstar and based on its well-known five-star rating system. Ranked on the basis of three-year annual compound return, the Hot 100 list is a measure of the best quality in the industry.

And just for fun—not advice—there’s a table showing the winners and losers based only on last year’s performance. Hardly surprisingly, nine of the 10 winners are precious metals funds—the success story of the past two years—while three of the five losers are in science and technology. According to Morningstar, the precious metals category delivered a 94-per-cent return last year, and experts—such as those in the Maclean’s 2003 roundtable (page 35)—remain bullish on gold and gold stocks. But almost all other categories returned less than 10 per cent, and the majority were in the red.

Last year’s markets were especially roiled by the scandals of the business world. WorldCom. Adelphia Communications. Tyco. ImClone and, of course, Martha. The zinger to top them all off: Enron. These companies became big household names, while Martha Stewart’s big name in households gained notoriety amid an insider trading probe. Together, the corporate scandals stripped not only billions from the markets,

WHAT THE RANKINGS MEAN

3-YEAR ANNUALIZED RETURN:

Annual compound return over the three years to Dec. 31,2002, in per cent, after management costs have been deducted. All funds in the Maclean’s tables must have a return history of at least three years.

LONGER-TERM PERFORMANCE:

The average annualized rolling return over every three-year period-changing month by month-in the last 15 years or since a fund’s inception. Rolling return means averages are not skewed by calendar years. Funds in this section have a minimum five-year history. In per cent, after management costs have been deducted.

RISK/RETURN SCORE:

Shows return against the degree of risk a fund has taken over the last three years, relative to the category average. The score (not a percentage) uses some clever math to measure the length and magnitude of a fund’s ups and downs against risk-free government treasury bills, and against the averages for the category. A higher number means the fund did better than its peers in the face of market volatility.

AVAILABILITY:

Some funds are restricted to certain provinces or certain professional groups, or have minimum investment requirements.

but also tore investor confidence to shreds. Now, helped in part by the sight of execs in handcuffs on TV, investor discomfort seems to be waning. “It’s great that we’ve exposed these people,” says Susan Marron, a 35-yearold working mother in Toronto. “It will make a difference to have some honesty back in the market.”

Marron, who lost about 20 per cent of her $40,000 RRSP portfolio last year, is considering buying ethical funds in response to the corruption she sees in the marketplace. Otherwise, she’s staying the course, invested in conservative equity funds. “I’ve got 25 years before I retire. I’m not overly worried.” Jennifer Jones, a 42-year-old professor in Sackville, N.B., has responded, not to corporate scandal, but to U.S. politics. She moved “a big chunk” of her mutual funds from U.S. investments, contrary to her adviser’s advice, into socially responsible funds. “I can’t stomach the idea of my money being anywhere near the billion-dollar-a-day military industry of the U.S.A.,” Jones says. “People don’t often make the link between politics and where their money goes.” Jones intends to invest more in real estate and on a lark, a small amount may go into an acquaintance’s home-based herbal tea company. “Why not? That’s a risk I can live with.” Professional portfolio managers are also adjusting their strategies in response to last year’s spate of scandals, says HSBC’s MacInnis. “We’ve always tried to be diligent, but you can always be more so,” he says. “It’s become more important in our thinking.” In particular, professional investors pay close attention to the quality of a company’s management and how it is paid, the independence of the board, and how capital is allocated.

Investors—the non-professional ones— have begun to pay close attention to another factor: the fees they’re paying. Whenever markets go down, concern about fees

CANADIAN BOND Funds that invest in bonds and other fixed-income securities (260 funds holding $32 billion in assets)

3-YEAR ANNUALIZED RETURN

TOP 10_

Acuity Pooled Fixed Income_11.59

FISQ Zero coupon - profil Quebec_10.20

Professionals Qc Bond_9.06

PH & N Bond Series A_8.95

TD Real Return Bond -1_8.94

Beutel Goodman Private Bond_8.90

TD Canadian Bond -1_8.88

Altamira Bond_8.77

Beutel Goodman Income_8.67

McLean Budden Fixed Income 8.65

BOTTOM 5_

MLI Conservative Asset Alloc GIF encore 1.89

BMP MatchMaker Security 2_0.82

BMP Reg MatchMaker Security 2_0.53

Mavrix Strategic Bond_0.11

Trans-Canada Bond -1.42

LONGER-TERM PERFORMANCE

TOP 10_

Altamira Bond_10.82

PH & N Bond Series A_10.10

Altamira Income_10.06

Batirente Bonds_10.00

Acuity Pooled Fixed Income_9.90

Equitable Life Canada Accum. Income 9.86

TD Canadian Bond -1_9.64

Perigee Index Plus Bond_9.61

Optimum Pbligations_9.60

McLean Budden Fixed Income 9.42

BOTTOM 5_

BMP Reg MatchMaker Security 2_3.99

Maritime Life Bond Series B_3.90

Millennia III Income Series 2_3.87

BMP Reg MatchMaker Security 1_3.70

MU AGF Canadian Bond GIF 3.36

RISK/RETURN SCORE

TOP 10_

Acuity Pooled Fixed Income_6.87

FISQ Zero coupon - profil Quebec_5.49

Professionals Qc Bond_4.48

PH & N Bond Series A_4.40

Beutel Goodman Private Bond_4.32

TD Canadian Bond -1_4.32

TD Real Return Bond -1_4.24

McLean Budden Fixed Income_4.10

Bissett Bond Class F_4.09

Beutel Goodman Income_4.09

BOTTOM 5_

MLI Conservative Asset Alloc GIF encore -2.35

BMP MatchMaker Security 2_-3.37

BMP Reg MatchMaker Security 2_-3.67

Mavrix Strategic Bond_-4.07

Trans-Canada Bond -5.52

CANADIAN EQUITY

Funds that invest in shares of Canadian companies (480 funds holding $72 billion in assets)

3-YEAR ANNUALIZED RETURN

TOP 10_

Sprott Canadian Equity_42.33

Chou RRSP_21.58

McElvaine Investment Trust_17.00

Hirsch Performance_16.33

ABC Fundamental-Value_13.41

Saxon Stock_13.05

Cl Signature Select Canadian_11.56

Co-operators Cdn Conserv Focused Eg 10.19 Equitable Life Canadian Equity Value 10.01

Opus 2 Canadian Growth Equity_9.96

BOTTOM 5_

Evolution Canadian Demographic_-20.45

Trans-Canada Value_-22.63

Trans GS2 Cdn Equity_-23.37

Trans IMS CDN Growth_-25.79

University Avenue Canadian_-36.82

LONGER-TERM PERFORMANCE

TOP 10_

Sprott Canadian Equity_43.56

Hirsch Performance_24.24

Acuity Pooled Canadian Equity_21.13

McElvaine Investment Trust_21.06

AIC Advantage_19.84

ABC Fundamental-Value_19.69

AIC Diversified Canada_18.71

Foresters Growth Equity_17.77

Altamira Equity_16.60

AIM Canadian First Class_16.51

BOTTOM 5_

Trans-Canada Value_2.81

Dynamic Focus + Canadian_2.51

Astra Ñatean Canadian Equity_0.29

StrategicNova Canadian Midcap Growth -1.87 Caldwell Canada -8.00

RISK/RETURN SCORE

TOP 10_

Sprott Canadian Equity_29.96

Chou RRSP_15.01

McElvaine Investment Trust_10.79

Hirsch Performance_7.51

Saxon Stock_6.94

ABC Fundamental-Value_6.74

Cl Signature Select Canadian_5.28

Co-operators Cdn Conserv Focused Eg 4.95

Equitable Life Canadian Equity Value_4.33

Cl Signature Select Canadian Seg I_3.72

BOTTOM 5_

Evolution Canadian Demographic_-29.73

Trans-Canada Value_-31.47

Trans IMS CDN Growth_-33.95

Trans GS2 Cdn Equity_-34.46

University Avenue Canadian -45.08

CANADIAN LARGE CAP

Funds that invest in large Canadian corporations (173 funds holding $22.6 billion in assets)

3-YEAR ANNUALIZED RETURN

TOP 10_

Cl Canadian Investment_8.71

Sun Life Cl Cdn Investment 75%_8.30

Mawer Canadian Equity_7.89

Great-West Life Dividend/Growth(M) B 7.68

Sun Life Cl Cdn Investment 100%_7.54

Great-West Life Dividend/Growth(M) A 7.43 McLean Budden Canadian Equity Value 6.86

O’Shaughnessy Canadian Equity_6.43

TD Canadian Blue Chip Equity -1_5.98

NAL-Canadian Equity_5.45

BOTTOM 5_

IA Ecflx NL Stock_-15.23

Mavrix Sierra Equity_-15.26

National Equities_-15.26

Mavrix Canadian Strategic Equity_-16.14

Altamira Capital Growth_-19.08

LONGER-TERM PERFORMANCE

TOP 10_

Dynamic Power Canadian Growth_15.76

Elliott & Page Canadian Equity Class A 15.70

Elliott & Page Blue Chip Class A_14.07

BMP Equity_13.41

FMOQ Canadian Equity_13.29

Renaissance Canadian Core Value_12.85

Clarington Canadian Equity_12.68

Maritime Life Value Equity R_12.48

O’Shaughnessy Canadian Equity_12.14

Co-Operators Canadian Equity_11.71

BOTTOM 5_

IG Beutel Goodman Canadian Equity_3.69

Elliott & Page Value Equity_2.67

MLI Elliott & Page Equity GIF_2.43

IG AGF Canadian Growth II_0.53

Investors Canadian Enterprise_-2.04

RISK/RETURN SCORE

TOP 10_

Cl Canadian Investment_3.42

Sun Life Cl Cdn Investment 75%_2.99

Sun Life Cl Cdn Investment 100%_2.27

Mawer Canadian Equity_2.11

Great-West Life Dividend/Growth(M) B 1.98

Great-West Life Dividend/Growth(M) A 1.74

McLean Budden Canadian Equity Value 1.24

O’Shaughnessy Canadian Equity_0.87

TD Canadian Blue Chip Equity -1_0.64

Clarica Summit Canadian Equity_0.29

BOTTOM 5_

IA Ecflx NL Stock_-21.08

National Equities_-21.09

Mavrix Sierra Equity_-22.56

Mavrix Canadian Strategic Equity_-25.61

Altamira Capital Growth -28.24

CANADIAN SMALL CAP

Funds investing in small and mid-size Canadian firms (132 funds holding $11.9 billion in assets)

3-YEAR ANNUALIZED RETURN

TOP 10_

Resolute Growth_45.39

Norrep_29.21

Bissett Microcap Class F_21.13

Mawer New Canada_19.88

Trimark Canadian Small Companies_19.80

Clarington Canadian Small Cap_17.33

Ethical Special Equity_16.36

Elliott & Page Growth Opportunities_16.11

R Small Cap Canadian Equity_15.75

Northwest Specialty Equity_14.67

BOTTOM 5_

University Avenue Canadian Small Cap -29.39

Mavrix Emerging Companies_-30.04

Cambridge Special Equity_-30.71

Cambridge Growth_-30.98

Mavrix Growth -46.97

LONGER-TERM PERFORMANCE

TOP 10_

Norrep_23.30

Resolute Growth_23.28

Bissett Microcap Class F_23.26

CIBC Canadian Small Companies_19.83

Northwest Specialty Equity_18.64

CPA Special Equity (KBSH)_18.02

GBC Canadian Growth_16.56

Talvest Millennium Next Generation_16.29

Fidelity Canadian Growth Company Sr A 16.07 Concordia Special Growth_15.71

BOTTOM 5_

Cambridge Special Equity_-3.24

Cambridge Growth_-3.48

Cl Explorer Sector Shares_-3.92

Dynamic Focus + Small Business_-5.64

AGF Canadian Aggressive All-Cap_-5.91

RISK/RETURN SCORE

TOP 10_

Resolute Growth_30.20

Norrep_19.18

Trimark Canadian Small Companies_13.23

Mawer New Canada_12.90

Bissett Microcap Class F_12.01

Clarington Canadian Small Cap_9.70

Ethical Special Equity_8.81

Elliott & Page Growth Opportunities_8.04

R Small Cap Canadian Equity_7.67

Northwest Specialty Equity_6.68

BOTTOM 5_

University Avenue Canadian Small Cap -44.91

Cambridge Special Equity_-45.49

Cambridge Growth_-46.43

CTI Strategic Growth_-48.68

Mavrix Growth -57.73

goes up, says Moshe Milevsky, a finance professor at York University in Toronto. “Investors are starting to realize that there is a lot of randomness their advisers can’t control, and that fees are not a guarantee against losing money,” says Milevsky, author of the new book Wealth Logic, which includes a chapter on management fees. According to Morningstar, management expense ratios— MERs—have edged up over the last four years. In the Canadian equity category, for example, the median MER has grown to 2.76 per cent from 2.50. Compared with the U.S.— where rates for equity funds average 1.5 per cent—Canadian MERs are high, Milevsky says. “There’s room,” he adds, “for a very lowcost fund manager in Canada like the U.S.’s Vanguard Group Inc., which offers basic garden-variety funds that track the market.” Maguire, investing in the O’Shaughnessy funds, pays an MER of 1.66 per cent, considerably less than the Canadian equity median. “Naturally, I’d like to pay the lowest possible fees,” he says, adding he’s aware these are relatively inactive funds that don’t require a lot of management. “If the fees went up, I’d complain,” he says, “but I’d still stick with the program. They’d have to go up a lot —a whole lot—for me to think about moving. It’s the nature of the funds I like.”

What Maguire has found are investments that allow him to sleep at night—something many investors search for. He is convinced the funds’ strategy is sound; he’s confident he is doing the right thing. Not all investors are so comfortable. A Royal Bank of Canada

PAYING MORE FOR LESS

Although overall returns from equity funds have dramatically declined in recent years, many mutual fund companies have nonetheless increased management expense ratios-their annual percentage fee for administering a fund.

Median annual return for Canadian equity funds (% return)

Median management expense ratio for Canadian equity funds (% MER)

SOURCE: MORNINGSTAR

poll conducted in November found widespread uncertainty, with about a third of respondents unaware even of the value of their RRSP portfolio. Among those who

planned to make a contribution, another third weren’t sure how much they’d invest. “The last two years of equity investing has been sobering for many Canadians,” says Matt Varey, an RBC senior vice-president. “With these markets, it can be tempting to postpone making decisions.”

Which would be a mistake, strategists say. It’s impossible to pinpoint the bottom of the market until we are well past it, but many analysts say it is close. “The equity markets continue to be under—yes, under—valued,” says Canaccord’s Manford. He expects North American stocks to be undervalued for several years. Even so, “that degree may be halved by year-end.”

Maclnnis of HSBC predicts an average return on equities in 2003 of between six and 10 per cent. “The question of dividends is increasingly important,” he says. Dividends play two important roles: they mean earnings are real, and they are a way of maintaining returns to investors in a world of single-digit growth in stock prices. While Maclnnis advises individual investors to use a balanced approach, he believes stocks will outperform cash or bonds: “We still think equities are the superior asset.”

Albert Aris agrees—even though he knows from experience how dangerous stocks can be. Aris, a 51-year-old self-employed contractor in Edmonton, had been investing in mutual funds for almost 25 years when he lost roughly a third—“enough money to buy a really nice car”—of his retirement fund. He sold the funds and now manages

CANADIAN BALANCED Funds with mixed portfolios of stocks and bonds (482 funds holding $65.9 billion in assets)

3-YEAR ANNUALIZED RETURN

TOP 10_

Saxon Balanced_11.68

Dynamic Focus + Balanced_11.13

Trimark Income Growth SC_10.71

Royal Monthly Income_10.55

CIBC Monthly Income_10.51

Dynamic Focus + Guaranteed Balanced 10.14

Trimark Income Growth DSC_9.68

TD Monthly Income -1_9.34

Mac Cundill Canadian Balanced Seg_9.17

Clarica SF Trimark Balanced 8.96

BOTTOM 5_

Excel Canadian Balanced_-10.15

Mavrix Diversified_-11.27

Caldwell Balanced_-11.38

Members Mutual_-14.54

Cambridge Balanced -21.69

LONGER-TERM PERFORMANCE

TOP 10_

ABC Fully-Managed_14.33

FMOQ Fonds De Placement_13.69

Acuity Pooled Canadian Balanced_12.82

Trans GS2 Cdn Balanced_12.69

Beutel Goodman Private Balanced_11.83

Mac Ivy Growth & Income_11.63

Transamerica BIG_11.53

Bissett Canadian Balanced Class F_11.48

McLean Budden Balanced Growth_10.90

AIM Canadian Balanced 10.89

BOTTOM 5

CUMIS Life Balanced_0.83

Astra Balanced Strategy_0.04

MLI Elliott & Page Balanced GIF_-0.55

Cambridge Balanced_-1.55

Members Mutual -5.61

RISK/RETURN SCORE

TOP 10_

Saxon Balanced_6.49

Dynamic Focus + Balanced_6.14

Royal Monthly Income_5.80

Trimark Income Growth SC_5.79

CIBC Monthly Income_5.72

Dynamic Focus + Guaranteed Balanced 5.19

Trimark Income Growth DSC_4.80

TD Monthly Income -1_4.76

Quadrus LLIM Income Plus_4.28

Clarica SF Trimark Balanced_4.12

BOTTOM 5_

Caldwell Balanced_-17.30

Transamerica BIG_-17.32

Mavrix Diversified_-17.56

Members Mutual_-20.50

Cambridge Balanced -29.31

his portfolio on his own, using a discount broker. He invests all of it directly in companies, in hopes of recouping his losses over the next five years. At that point, he intends to follow the experts’ advice and diversify into gold, precious metals, foreign cash and bonds. “I keep thinking we’ve found the bottom,” says Aris, who doesn’t intend to retire for another 20 years. “I’m purchasing stocks on the feeling that we’re going to get another wave.” Aris, who checks his stocks daily and conducts intensive research before investing, says he’s learned an important lesson: know what you’re buying. He adds: “My own tuition fee was huge.”

Mark Thelander paid a hefty price, too, to learn about the market. The 29-year-old Torontonian lost half of his $20,000 portfolio. A systems analyst, he was heavily invested in tech stocks—“all the good stuff,” such as Nortel Networks, Research in Motion, Celestica. But while those tanked, it wasn’t a complete washout. Thelander sold Com Dev International Ltd. at $20 after paying $4 for it. “I’m not so bitter: I gained and I lost.” He’s remained invested in equities, mainly in a Canadian growth mutual fund and an international equities fund. He admits greed was a driving factor and says it continues to influence his decision to stay invested in stocks. “I don’t want to miss the little bumps up.” Still, after selling his first house, Thelander, who is married and expects to have children in the next few years, had $50,000 to park for half the year before investing it in a new home. A couple of years ago, he would have put some of it in the market, he says. Instead, it sat for eight months in one of the safest vehicles available: a Canadian money market fund—and made “a whole $200.” Next, Thelander plans to take out a $10,000 RRSP loan to invest mostly in equities. “For my age, we’re close enough to the bottom,” he says. “I’m glad I’m young and didn’t have much to lose.”

Chet Beeswanger is at the other end of the spectrum. The 5 3-year-old miner wants to retire in two or three years. Last year, his portfolio shrank by 13 per cent—and the volatile markets have made him a cautious investor. “I’m getting too close to the end to take another 10to 15-per-cent drop,” he says. Each month, Beeswanger contributes “every available cent” to his RRSP. While most of his investments are still in equities, the new inflow goes into the most conservative funds. He says his portfolio, in the low six figures, is close

U.S. EQUITY

Funds that invest in shares of U.S. companies (459 funds holding $28.5 billion in assets)

3-YEAR ANNUALIZED RETURN

TOP 10_

All Points U.S. Bear_22.98

Chou Associates_19.60

North Growth U.S. Equity_16.60

ABC American-Value_11.66

AIC American Focused_9.68

AIC RSP American Focused_9.26

Great-West Life U.S. Large Cap Val (IG) 4.65

Investors U.S. Large Cap Value_4.20

Investors U.S. Large Cap Value RSP_3.56

Templeton Mutual Beacon_3.03

BOTTOM 5_

Clarington U.S. Growth_-27.42

AIM American Growth_-34.34

AIM RSP American Growth_-34.55

All Points U.S. Geared_-34.79

Mavrix Enterprise_-35.70

LONGER-TERM PERFORMANCE

TOP 10_

All Points U.S. Geared_28.03

Janus American Equity_27.88

VistaFund 1 Am Stock_22.06

MD U.S. Large Cap Growth_21.72

VistaFund 2 Am Stock_21.13

Fonds de Croissance Select_19.62

North Growth U.S. Equity_19.10

BPI American Equity_18.50

Cl American Growth_18.32

AIC Value_17.19

BOTTOM 5

TD U.S. RSP Index -1_-2.87

Great-West Life American Growth(A) A -3.07

All Points U.S. Bear_-3.36

Clarington U.S. Growth_-4.57

Astra McLean Budden U.S. Equity_-6.56

RISK/RETURN SCORE

TOP 10_

All Points U.S. Bear_12.94

Chou Associates_12.67

North Growth U.S. Equity_8.85

ABC American-Value_4.21

AIC American Focused_4.11

AIC RSP American Focused_3.71

Great-West Life U.S. Large Cap Val (IG) -1.78

Investors U.S. Large Cap Value_-2.20

Templeton Mutual Beacon_-2.43

Investors U.S. Large Cap Value RSP_-2.84

BOTTOM 5_

Cambridge American Growth_-40.00

All Points U.S. Geared_-45.06

Mavrix Enterprise_-46.50

AIM American Growth_-47.11

AIM RSP American Growth -47.16

GLOBAL EQUITY

Funds investing in companies anywhere in the world (518 funds holding $62.6 biliion in assets)

3-YEAR ANNUALIZED RETURN

TOP 10_

Friedberg Toronto Trust Inti Securities 27.40

Mac Ivy Foreign Equity_6.11

Mac Ivy Foreign Equity Segregated_6.02

Templeton Global Smaller Companies 5.91

Mac Ivy RSP Foreign Equity_5.70

Mac Cundill Value Series A_5.48

Templeton Global Smaller Cos. RSP_5.47

Trimark Fund SC_5.40

CPA Global (Trimark)_5.25

Mac Cundill Value Series C 5.08

BOTTOM 5_

GGOF RSP Global Growth Classic_-26.69

GGOF Global Growth Mutual_-26.77

GGOF RSP Global Growth Mutual_-27.12

AGF Aggressive Global Stock_-28.38

AGF World Companies_-28.75

LONGER-TERM PERFORMANCE

TOP 10_

Bissett Multinational Growth Class F 16.05

Trimark Fund SC_15.47

Clarington Global Small Cap_15.28

AGF International Value_15.25

Altamira Global Small Company_15.14

AGF Aggressive Global Stock_15.04

Cl Global Small Companies_14.73

Renaissance Global Value_14.70

Trimark Select Growth_14.65

Janus Global Equity_14.34

BOTTOM 5

APEX Global Equity_0.95

Cl Global Segregated_0.86

Maritime Life Global Equities Series B -0.80

Cambridge Global_-1,29

Opus 2 Ambassador Growth Portfolio -2.52

RISK/RETURN SCORE

TOP 10_

Friedberg Toronto Trust Inti Securities 13.68

Mac Ivy Foreign Equity_0.85

Mac Ivy Foreign Equity Segregated_0.81

Mac Ivy RSP Foreign Equity_0.45

Templeton Global Smaller Companies_0.28

Templeton Global Smaller Cos. RSP_-0.14

Mac Cundill Value Series A_-0.50

Trimark Fund SC_-0.55

CPA Global (Trimark)_-0.67

Mac Cundill Value Series C -0.88

BOTTOM 5

GGOF Global Growth Mutual_-31.74

GGOF RSP Global Growth Mutual_-32.12

Cambridge Global_-32.69

AGF Aggressive Global Stock_-34.29

HOW THEY PERFORMED

Average return in 2002 in selected industry categories (%)

Precious metals Natural resources Canadian income trust Canadian bond Canadian mortgage Real estate

Canadian money market Canadian dividend Canadian balanced Canadian small cap Canadian equity Canadian large cap Financial services Asia Pacific Global equity U.S. equity U.S. small & mid cap Health care Science & technology

THE NEW CENTURY’S SLIDE

Total mutual fund assets in Canada

SOURCE: MORNINGSTAR

to what he’ll need to support a modest retirement near Halifax. But it’s not quite there yet and, recognizing the Catch-22 of retirement planning, he says that to get it to the level he wants, he has to take the risk of remaining at least partly invested in equities. Besides, there’s not much choice. “Where else do you put your money? It’s not as bad as bingo, but there’s no free ride. You have to realize there’s risk.”

According to the Royal Bank poll, more than half of Canadians think the plunging

stock markets of the last few years have cut into their retirement plans. Among respondents 55 or older who are still working, 57 per cent said they are behind in saving for their retirement—up significantly from the 48 per cent of last year. And, only one in four Canadians believe they will fund their retirements from their own investments, down from 35 per cent in 2000. “Canadians are feeling less confident in their ability to provide for their own future,” says Brenda Vince, president of RBC Funds Inc.

In another poll for the Toronto-Dominion Bank, investors said they’re scaling back. The average that Canadians say they’ll contribute to their RRSPs this year is $3,900,20 per cent less than last year’s $4,850. People are shying away from the equity markets, the poll results suggest. Last year, half said they’d buy equity mutual funds as part of their plans, but this year only a quarter intend to.

Aspirations have shrunk as well. Last year, investors said they thought they’d need $652,000 to retire comfortably. This year, they say $547,000. Even then, they’re not confident they’ll achieve their target. Less than three in 10 say they’ll have enough, while a quarter believe they probably won’t. Still, the poll shows widespread optimism—or is it naive confusion? Investors expect the same return, nine per cent, that they hoped for a year ago—but didn’t get.

Forecasting markets, by the amateurs or the pros, is often a foolish exercise. For the past 12 years, Mercer Investment Consulting has asked money managers around the world what they expect for the coming year. “Actual results at the end of the year have often been very different from what managers were expecting at the beginning of the year,” says Marcel Larochelle, leader of the company’s Canadian practice. A year ago, managers predicted a tough first half of 2002, followed by a strong recovery in the markets in the second half. Wrong, of course. This year, they expect equity markets to return 10 to 12.5 per cent, while their take on bond markets ranges from a four-per-cent loss to a seven-per-cent gain. “All we can do now,” Larochelle says, “is hope that the slight recovery in the fourth quarter of2002 is a positive indication that our fearless forecasters have it right for 2003.” Just remember, the perfect crystal ball has yet to be found. And if it appears, it will come with a 100-per-cent management fee. [¡H

kmacklem@macleans.ca

ALL THE REST

Funds not covered in Maclean’s other charts (1,924 funds holding $199.1 billion in assets; category in square brackets when unclear)

3-YEAR ANNUALIZED RETURN

TOP 10_

Royal Precious Metals_45.40

Mac Universal Precious Metals_43.83

ADA Diversified Fut Ltd Part [specialty] 38.34

BMP Precious Metals_34.74

Dominion Equity Resource_34.16

Dynamic Canadian Precious Metals_30.16

AGF Precious Metals_29.69

TD Precious Metals -1_28.41

London Life Precious Metals (MAXXUM) 28.12

Dynamic Global Precious Metals_25.75

BOTTOM 5_

AIM Global Telecommunications Class -43.04

AIM RSP Global Telecommunications -43.69

Altamira e-business_-44.22

Trans IMS Information Technology_-47.53

First Trust Dow Jones Internet Tr 1999 -55.53

LONGER-TERM PERFORMANCE

TOP 10_

Altamira Science & Technology_43.22

Talvest Global Science & Technology_41.75

Talvest Global Health Care_38.46

Cl Global Telecommunications Sector 36.74

AIM Global Technology_35.34

CIBC Global Technology_34.00

Goodwood Fund [altern, strategies]_32.54

AGF Aggressive Growth [U.S. small/mid] 29.02

Trans GS2 US 21st Century [sc. & tech.] 25.16

Cl Global Technology Sector_23.89

BOTTOM 5_

StrategicNova World Precious Metals -9.54

Friedberg Diversified [altern, strategies] -9.78

Ethical Pacific Rim_-13.49

AGF Managed Futures [specialty]_-21.28

Cambridge Precious Metals_-25.12

RISK/RETURN SCORE

TOP 10_

Dominion Equity Resource_20.52

Mavrix Dividend & Income_11.93

Sentry Select Canadian Energy Growth 11.46

Trimark Canadian Resources_9.62

Mac Universal Canadian Resource_9.57

Cl Signature Canadian Resource_9.55

PH & N Dividend Income Series A_8.15

TD Energy -1_8.04

London Life Nat. Resource (MAXXUM) 8.04

Canada Life Flex Enhanced Dividend_7.82

BOTTOM 5_

AIM Global Technology_-56.46

AIM RSP Global Technology_-56.54

CIBC Global Technology_-56.88

Trans IMS Information Technology_-61.28

First Trust Dow Jones Internet Tr 1999 -71.09