The best kinds of mutual funds outperform in the long term, at the best price. With ETFs nipping at the heels of more traditional investments, the pressure’s been on to deliver a performance worth the weight of the higher management fees. There are some funds that delivered.
Growth-oriented and global equity portfolios dominated the charts in 2020. Only a couple of the best-performing small-cap and Canadian stocks funds made the leaderboard. These equity funds shone through 2020, not only maneuvering around potential losses but making the most of a strong market recovery to catapult portfolio returns. And many of the funds outperformed in the long term, consistent with the attributes of gold medalists.
“Our analyst ratings and quantitative ratings rely on three main ‘pillars’: people, process, and parent – each of which adds insight into a fund’s ability to generate after-fee positive alpha over time,” explains Morningstar’s Director of Investment Research, Ian Tam. “In the time that our quantitative ratings have been in place here in Canada, we’ve found this exactly to be the case. Our data shows that funds which have received gold, silver or bronze ratings have on average outperformed those that have received negative or neutral rated funds, after receiving the rating.”
Here they are, ranked by fees as well as short and long-term returns:
| Name | MER (%) | Annual Return 2020 (%) | Total Return Annualized 10yr (%) |
| DMP Power Global Growth Class Series F | 1.67 | 99.30 | 15.63 |
| TD US Mid-Cap Growth - F | 1.11 | 22.96 | 14.58 |
| Manulife Global Small Cap F | 1.23 | 17.87 | 13.97 |
| Manulife US Equity F | 1.24 | 16.08 | 13.43 |
| North Growth US Equity Advisor Series F | 0.70 | 29.61 | 13.00 |
| Renaissance Global Small Cap Class F | 1.22 | 41.09 | 12.44 |
| Capital Group Global Equity Canada F | 0.82 | 32.16 | 12.08 |
| PH&N Global Equity Fund F | 0.95 | 27.23 | 11.74 |
| RBC Vision Global Equity Fund F | 0.99 | 30.12 | 11.62 |
| RBC U.S. Mid-Cap Growth Equity Fund F | 0.92 | 22.79 | 11.45 |
It might not come as a surprise that a Noah Blackstein fund takes our top spot for the best gold medal equity fund available to Canadians. As of October 31st, 2020, DMP Power Global Growth Class F had a focus on innovation with technology companies taking up nearly half of the holdings and a growth style that’s off the charts [see below].
Stock Style Map: DMP Power Global Class Series F
Source: Morningstar.ca
TD’s US Mid-Cap Growth Fund isn’t new to our leaderboard either. This fund was one of our top picks of the decade at the end of 2019 and it performed admirably in 2020. One factor behind the success of the fund could be the high conviction, low-turnover (33%) approach sector mix that has technology and healthcare stocks on near equal footing, with allocations of around 25% and 26%, respectively, as of Dec 31, 2020.
In 3rd, we have what a fund that was our number one pick for the decade ending 2019. Manulife Global Small Cap Fund is also a low turnover fund at 32% with bets focusing on industrials (32.19%) and technology sectors (23.38%) as of Dec 31, 2020. It’s also maintained a heavy allocation to international stocks, currently sitting around 78%.
Next up, with top performance at the lowest cost, we have North Growth US Equity Advisor Series F Fund, staying true to a philosophy of “Growth at a Reasonable Price”. A four-person portfolio management team handpicks a basket of stocks with an ESG edge that excludes tobacco and oil and gas industries.
CIBC’s Renaissance Global Small Cap Class F, sub-advised by Wasatch Global Investors, would have appeared higher up on the list if they eased up on the fees a little bit and continue to keep up the stellar recent performance. Since 2018, the fund’s put on an index-busting performance with an interesting combination of healthcare, technology and industrials, currently sitting at around 20%, 28%, and 23%, respectively, as of Dec 31, 2020.
One of our best mutual funds for retirement at the end of 2019 makes an appearance with Capital Group Global Equity Canada F posting a strong 2020 performance for a very reasonable fee. The growthy large-cap approach has well-diversified portfolio of 10-20% allocations in consumer cyclicals, financial services, technology and health care sectors as of Dec 31, 2020.
Also well diversified and in similar sectors, PH&N Global Equity Fund F from RBC offers a very high conviction and low-turnover (15%!) approach. The fund’s been consistently beating benchmarks since 2017 and at a reasonable rate.
RBC’s ESG offering also made an appearance with the RBC Vision Global Equity Fund F reminding us that social responsibility can be a source of alpha. For the fund’s medium risk rating, its ability to outperform both the category and index by double-digits last year is impressive.
Lastly, with a low-turnover (16%) approach to the U.S. equity market that focuses on technology, healthcare and industrials, RBC’s U.S. Mid-Cap Growth Equity Fund F didn’t outperform last year as much as peers, but since 2011 it’s consistently beaten the market – and long term is what it’s all about.
