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Normandin Beaudry

Review of the institutional fund performances over the first semester of 2008

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There, in black and white

Bulletin NB Vol. 11 N. 9, August 2008

We are pleased to present our mid-year review analyzing the performance as at June 30, 2008, of managers comprising the Normandin Beaudry Investment Funds Universe.

The goal of this review is to keep you up-to-date on the recent performance of financial markets and institutional managers. You will receive this review each year after the end of the first semester.

All institutional managers included in the Normandin Beaudry Investment Funds Universe must adopt an active portfolio management approach, have a performance history of at least three years and manage a minimum of 300 million dollars in assets. All performance statistics are presented before management fees.

The median return for balanced funds for the first half of 2008 was -0.64% and first quartile performance for these funds showed a return of more than 0.26%. Performances for Canadian asset managers, which account for the main components of balanced funds, are presented in the table below.

Canadian asset performance - from January 1, 2008to June 30, 2008
CategoryCanadian BondCanadian Equities
(Large cap)

Number of funds 53 60
BenchmarkDEX UniverseS&P/TSX    
Benchmark return2.22%5.99%
Benchmark percentile rank6826

Median      
Return2.36%2.66%
Value added0.14%-3.33%

First quartile      
Return2.57%6.18%
Value added0.35%0.19%

Interest rates for short-term Canadian bonds fell in the first semester, whereas rates for long-term Canadian bonds remained relatively stable during this period. The bond market was also very volatile throughout the first half of 2008. The strong volatility of the bond market during this period is substantiated by the widening of and variation in credit spreads. The first semester was characterized by the search for high quality bonds ("fly to quality") in an effort to stay away from securities from companies hit hard during this period, particularly those from the Financial Services sector. The median manager return outperformed the benchmark by 0.14%. A first quartile performance generated value added of 0.35% and more. 

In comparison with the benchmark, large cap Canadian equity managers had a median value added of -3.33% in the first semester. This significant subtracted value is the result of the underweighting of the Materials and Energy sectors by the median manager for the first half of 2008. By a large margin, these two sectors posted the best performances relative to the index with respective returns of 26.2% and 24.3%. We can also note the weak value added of the first quartile manager, beating the return posted by the S&P/TSX Index by only 0.19%. 

As regards foreign stocks, the main indexes posted strong negative returns regardless of the currency used, as indicated in the table below. Since the start of 2008, the Canadian dollar weakened by 3.0% versus the U.S. dollar, in comparison to a strengthening of close to 10% for the same period last year. The Canadian dollar also lost ground in relation to the most important currencies (Euro, yen and pound). 

Foreign asset performance - Janvier 1, 2008 to June 30, 2008

CategoryU.S. EquitiesInternational EquitiesGlobal Equities

Number of funds 76 65 49
BenchmarkS&P 500MSCI EAFEMSCI World
Benchmark return
(Canadian dollars)
-9.20%-8.22%-7.80%

Benchmark percentile rank 61 59 47

Benchmark return
(local currency)
-11.91%-15.70%-12.81%

Median      
Return-8.25%-7.64%-8.01%
Value added0.95%0.58%-0.21%

First quartile      
Return-6.22%-5.90%-6.48%
Value added2.98%2.32%1.32%

The median manager for U.S. equities obtained a value added of 0.95% in comparison with the S&P 500 index. This value added stems from the underweighting of the Financial Services sector and the overweighting of the Energy sector for the first half of 2008. This comment also applies to the median manager for International equities. Sector performance in the United States and internationally is comparable to performance in the Canadian market with the Financial Services sector posting significant negative returns and the Energy and Materials sector posting excellent returns. 

As regards the median manager for Global equities, the subtracted value of 0.21% in comparison with the MSCI World Index can be explained in part by geographic distribution. Countries that posted weaker returns, particularly in Europe, were overweighted for the first half of 2008. 

 

Please feel free to contact us for additional information.

514.285.1122
 
630, René-Lévesque Blvd. West, 30th floor
Montreal, Quebec, H3B 1S6