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There was no shortage of contenders for the 2008 Golden Raspberry the ugly twin of the Academy Awards (also known as the Razzies). Sure, it was a tough year for just about everyone but these funds showed a knack for taking the brunt of the market carnage.
First, the nominees:
Hedge funds have a way of bringing out the best and worst in fund managers. Most hedge strategies, such as short selling and commodity futures, are like rocket fuel they can take you to the moon or they can blow up on the launch pad. One hedge fund that went to smithereens before takeoff is the Dynamic Power Hedge Fund, which cost investors 72 per cent last year. To put that in perspective the TSX lost 33 per cent of its value in 2008.
Unlike regular mutual funds, hedge funds are not required to disclose their secrets for failure but other hedge managers must have been privy to Dynamic's strategy. The Salida Multi-Strategy Hedge fund lost 66.5 per cent in 2008 and the Jemekk Long/Short LP lost 59.8 per cent.
Mackenzie Financial Corporation made a lot of bad calls in 2008. Value investing legend Peter Cundill's Mackenzie Cundill Emerging Markets Value Class A fund lost 64.8 per cent in its first full year on the market. The value types say value investing requires patience but the average emerging market fund limited its loss to 46.4 per cent and the benchmark MSCI Index held Canadian dollar losses at 41.4 per cent.
The Mackenzie Universal World Resource Class fund took a 64.8 per cent hit last year from the plunge in global natural resources. However, the average natural resource fund held losses at 44.9 per cent and the Globe Natural Peer Index dipped 44.7 per cent.
The Mackenzie Growth fund was more like the Mackenzie shrink fund. The Canadian focused equity fund shriveled sixty per cent in 2008. Just over half the $210-million was invested in Canada but a bigger chunk was in the troubled finance and resource sectors. In comparison, the average Canadian equity fund lost 30 per cent while the TSX Composite fell 33 per cent.
Bay Street darling Sprott Asset Management lost a lot of its luster in 2008. The Sprott Energy fund caught the rough edge of the resource crash with a 64.5 per cent loss and the Sprott Growth fund lost 62.6 per cent. Unfortunately for Sprott, the investment team's idea of a growth sector was natural resources. By the end of the year, three-quarters of the fund's $88-million portfolio was in materials and energy.
To be fair, it can be argued that the Golden Raspberry nominees are victims of a cruel and unusual global financial collapse. Managers found themselves on the losing end of a losing sector in a losing economy. But what about the funds that ranked worst in the best asset class?
The Golden Raspberry winner is a toss-up. Plunging markets and a crumbling economy sent freaked-out global investors to the relative safety of bonds. The Citigroup World Government Bond Index jumped 38.7 per cent last year and the average global fixed income fund lagged behind with a 17.6 per cent gain.
But throughout that rally the Dynamic Advantage Bond fund lost 3.4 per cent. 85 per cent of the fund was invested in Canadian fixed income with the bulk of maturities in the five to ten year range. The fund is just over two years young, and its market price at any given time is not necessarily reflective of its yield at maturity, but you have to pity the poor retiree who had to sell at a loss because the finance industry led him to believe it was fixed income.
Global bond funds also suffered from record low interest rates and the sinking Canadian dollar but that doesn't get Canadian bond funds entirely off the hook. In 2008 the Globe Canadian Fixed Income Peer Index gained nearly three per cent and the average Canadian fixed income fund advanced by the same amount.
That means the 2008 Golden Raspberry goes to TD Corporate Bond Capital Yield fund. Unit holders who cashed out at the end of the year took an 8 per cent hit on a portfolio of rock-solid Canadian bond issuers that have made good on their debt since John A. MacDonald first staggered into the House of Commons. At the end of the year, 85 per cent of the $140-million in assets was invested in corporate debentures and the rest in provincial and federal government bonds. What could go wrong?
Dale Jackson has been a producer at Report on Business Television since its launch in September 1999.