Active managers have so far proved their mettle in 2013, with 79% of large cap Canadian equity investment managers beating the S&P/TSX Composite Index in the first quarter of 2013, according to the Russell Canadian Active Manager Report. The median large cap manager return was 4.7% in the first quarter of 2013 compared to the benchmark S&P/TSX Composite return of 3.3%. Active management did well at a time when the index was dragged down heavily by the Materials sector and by gold stocks. “The performance of gold stocks has a notable impact on the quarter-to-quarter relative performance of investment managers in Canada because it is such a large weight in the benchmark,” says Kathleen Wylie, Head, Canadian Equity Research at Russell Investments..
A few other highlights from the first quarter of 2013:
— All styles of large cap managers outperformed the Index.
— The median value manager returned 5.6% compared to the median dividend-focused manager return of 5.3% and the median growth manager return of 4.3%.
— Value managers benefited from having large overweights to the Information Technology, Consumer Discretionary and Consumer Staples sectors, which all outperformed. Dividend-focused managers were helped by their overweights to the Industrials, Telecommunication and Financials sectors, which also outperformed.
— Growth managers have been hurt by their underweights to Financials and Telecommunications but helped by their overweight to the Energy sector, which outperformed in the quarter.
— Although the S&P/TSX Small Cap Index return of 0.6% lagged the S&P/TSX Composite return of 3.3%, small cap managers added value against both their benchmark and large cap managers in the first quarter. The median small cap return of 5.4% was ahead of the median large cap return of 4.7%.
— Small cap managers have notably larger weights in the Industrials, Consumer Discretionary and Information Technology sectors compared to large cap managers and those three sectors were strong performers in the small cap space, which benefited small cap managers.