It was a good news/bad news story in the third quarter of 2012.
The good news is the S&P/TSX Composite Index rose 7.0% – the largest quarterly increase since the fourth quarter of 2010, reports Russell Investments. The bad news is only 18% of large cap managers in Canada outperformed the benchmark Index – the lowest on record. That was down from 69% in the second quarter.
Three out of 10 sectors beat the S&P/TSX Composite Index in the third quarter, the narrow sector performance, led by Energy and Materials, made it challenging for active managers to keep up with the benchmark return.
“Large cap managers on average are 5% underweight Materials and nearly 2% underweight Energy stocks, so when those two sectors run, these managers struggle to beat the benchmark,” says Kathleen Wylie, head, Canadian equity research at Russell Investments.
Additional findings include:
- Gold stocks rose 18%;
- Goldcorp Inc. was among the top-contributing stocks, with its price rising 18%;
- Not one dividend-focused manager was able to beat the S&P/TSX Composite Index’s return (median return of 4.5%);
- Dividend managers were 12% underweight Materials and nearly 4% underweight Energy at the start of the quarter;
- The first four weeks of the fourth quarter appear to be more favourable for active managers, with more sector breadth as six out of 10 sectors are ahead.