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Normandin Beaudry

Review of the institutional fund performances over the first semester of 2010

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There, in black and white

NB Bulletin Vol. 13 N. 9, August 2010

We are pleased to present our mid-year review analyzing the performance as at June 30, 2010, of institutional managers comprising the Normandin Beaudry Investment Funds Universe. The purpose 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.

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 assets. All performance statistics are presented before management fees.

The median return for balanced funds for the first half of 2010 was -1.91%, and first quartile performance for these funds showed a return of more than -1.29%. Also, over the one year period ending on June 30, 2010, the median return for balanced funds was 6.77%, and first quartile performance for these funds showed a return of more than 7.81%.

Performances for Canadian assets, which account for the main components of balanced funds, are presented in the table below.

Canadian asset performance - from January 1, 2010 to June 30, 2010

CategoryCanadian BondsCanadian Equities
(large cap)

Number of funds4758
BenchmarkDEX UniverseS&P/TSX
Benchmark return4.23%-2.54%
Benchmark percentile rank6737

Median    
Return4.41%-3.36%
Value added0.18%-0.82%

First quartile    
Return4.77%-2.12%
Value added0.54%0.42%

Bonds with longer maturities performed well in the first half of 2010. The performance of bond managers versus the benchmark for the first half of 2010 are thus primarily explained by duration management in comparison with the benchmark, i.e. portfolio positioning on the interest rate curve and security selection among corporate bond subsectors. Provincial bonds and corporate bonds posted similar returns (4.57% and 4.52%), and federal bonds posted a return of 3.84%.

Large cap Canadian equities posted a return of -2.54% in the first half of 2010. The valued added by the median manager was -0.82% in comparison with the benchmark. This can be explained in part by the strong performance of the gold securities subsector that obtained a return of 13%, primarily in the second quarter of 2010. It should be noted that several institutional managers typically underweight this subsector. Small cap securities (BMO Small Cap Index: 0.42%) outperformed large cap securities (S&P/TSX 60: -3.28%). In addition, the first quartile manager generated little value added, outperforming the S&P/TSX index by only 0.42%.

In the first six months of 2010, the Canadian dollar depreciated by 1.3% versus the U.S. dollar and 6.2% to the yen, but appreciated by 15.1% versus the euro and 6.7% on the pound sterling. Foreign stocks generated negative returns in the first half of 2010, as indicated in the table below.

Foreign asset performance - from January 1, 2010 to June 30, 2010

CategoryU.S.
Equities
International
Equities
Global
Equities
Emerging
Markets
Equities

Number of funds75745632
BenchmarkS&P 500MSCI EAFE
(net)
MSCI World
(net)
MSCI EM
(net)
Benchmark return
(Canadian dollars)
-5.40%-12.06%-8.64%-4.91%

Benchmark percentile
rank
29785947

Benchmark return
(local currency)
-6.66%-7.34%-7.05%-4.30%

Median        
Return-6.15%-10.27%-8.30%-5.10%
Value added-0.75%1.79%0.34%-0.19%

First quartile        
Return-5.26%-8.76%-7.42%-3.84%
Value added0.14%3.30%1.22%1.07%

The median US equity manager obtained an added value of -0.75% in comparison with the S&P 500 index. We can also note the weak value added of the first quarter manager at 0.14%. In the first half of 2010, managers that favoured large cap securities subtracted value in comparison with the benchmark, and small cap securities generated a return of -0.63%, outperforming large cap securities.

As regards international equities, the median manager obtained a strong value added of 1.79%. To obtain a first quartile performance, the manager needed to add more than 3.30% versus the MSCI EAFE. On average, international equities managers appear to have avoided countries that generated strong negative returns owing to issues concerning public debt funding. Small cap securities also outperformed large cap securities in the international equity market during the first half of 2010.

As regards global equities, the median manager added 0.34% in the first half of 2010. The first quartile manager added 1.22% in comparison with the MSCI World Index. Finally, the median emerging markets equity manager subtracted 0.19% in the first half of 2010. The first quartile manager added more than 1.07% in comparison with the MSCI Emerging Markets Index.


 

 

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