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The latest scorecard for mutual fund performance during the first quarter is out, which again makes for interesting reading. Standard & Poor's found that only 40 per cent of actively managed Canadian equity mutual funds beat the S&P/TSX composite index, and the longer the time horizon, the worse the beat-rate.

Over three years, just 10.9 per cent of funds beat the benchmark index. Over five years, a mere 3.3 per cent of funds beat the index. The S&P approach corrects for survivorship bias, essentially taking into account funds that shut down.

In the first quarter, the S&P/TSX composite index rose 2.5 per cent, but the moves by subindexes were far more dramatic - meaning that beating the index meant concentrating your bets on at least one of the winning groups of stocks.

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Energy didn't cut it: The group actually fell 2.7 per cent. Therefore, any fund manager that made a big bet here was doomed to lag the benchmark index.

On the other hand, financials rose 7.1 per cent, information technology stocks rose 6 per cent, industrials rose 5.7 per cent and telecom services rose 4.3 per cent. It appears that relatively few mutual funds bet big on these stocks though.

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About the Author
Investing Reporter

David Berman has been writing about business and investing since 1995. He has written for a number of magazines, including Canadian Business and MoneySense. He worked at the Financial Post as an investing writer and daily columnist before moving to the Globe and Mail in 2008. More

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