Funds that outperformed in 2008

Seven equity funds that protected on the downside during the 2008-2009 financial crisis and recovered faster than the index

Ian Tam, CFA 13 March, 2020 | 1:52AM
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Strong woman

After the triple hit to the Canadian economy (COVID19 worries, a surprise interest rate cut, and an oil price plunge) the S&P/TSX Composite has fallen about 12% YTD, erasing a bit over half the gains made last year. Although Morningstar’s view is that the impact of COVID19 will have marginal impact to world GDP over the long term, this doesn’t mean that investors aren’t feeling the full pain of today’s equity markets.

To see what we could learn from history, I decided to look for Canadian equity managers who were able to outperform the index during the 2008-2009 financial crises. They could be ideas for those who might consider paying for active management during today’s volatile times. The key measure that outlines this trait is known as maximum drawdown, or the value lost from peak to valley during a market correction. A related measure is known as the recovery period, or the number of months it took for the fund to recover its peak value from prior to the correction. To this end, I screened Morningstar’s database of equity managers across these dimensions:

(1)    A max drawdown the S&P/TSX Composite or Small-Cap Total Return Indices and a recovery period in line or better than the indices.

(2)    An inception date prior to January 1st, 2007

(3)    The Morningstar Quantitative Rating, or “medalist” rating of bronze, silver or gold. As a reminder, the medalist ratings are a forward-looking assessment of a fund’s prospective ability to outperform similar funds after fees, based on five factors: people (the quality of management team); process (the effectiveness and consistency of the investment process); parent (organizational structure and talent retention); performance; and price (fees).

Only the oldest share class of each fund in our database was considered. Here’s what we found:

Name MER (%) MQR YTD  Ret (%) 10-yr Ret (%) 15-yr Ret (%) Max Drawdown (%) Recovery (Months)
RBC North American Value Fund A 1.93 Gold -11.2 7.3 7.4 -31.4 19
RBC Canadian Dividend Fund A 1.76 Gold -12.1 5.8 5.8 -37.7 23
Scotia Canadian Dividend A 1.74 Silver -12.1 6.9 6.2 -38.1 24
IG Beutel Goodman Canadian Small Cap C 3.11 Silver -16.6 4.0 5.2 -38.5 13
Dynamic Value Fund of Canada 2.31 Bronze -10.2 3.4 5.4 -40.4 21
TD Dividend Growth - I 2.03 Bronze -14.1 5.3 5.6 -40.9 24
Fidelity Canadian Large Cap Sr A 2.52 Bronze -6.3 9.0 8.6 -42.0 22
S&P/TSX Composite TR     -11.9 5.3 5.9 -43.3 24
S&P/TSX Small Cap TR     -21.0 0.2 0.7 -54.9 22

Source: Morningstar Direct Data as of March 10, 2020

Only seven funds made the cut. They all have a medalist rating, meaning we expect them to outperform. This article does not constitute financial advice. It is always recommended to speak to a financial advisor or investment professional before investing.

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About Author

Ian Tam, CFA  is Investment Specialist at Morningstar Canada. 


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