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What are we looking for?

The biggest money-makers in 2012 among Canadian-listed exchange-traded funds (ETFs).

The screen

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We searched for the 15 best-performing ETFs in all fund categories. U.S.-dollar ETFs were excluded, as were leveraged ETFs, which can amplify long and short bets.

What did we find?

A U.S. bank star.

BMO Equal Weight U.S. Banks (hedged to Canadian dollars) led the way among all ETFs with a robust 33-per-cent gain last year.

U.S. bank stocks, which cratered during the financial crisis, have gained ground since last spring after most passed stress tests that declared them to be strong enough to survive a severe recession. The results paved the way for banks to raise dividends or buy back shares. Improving U.S. economic data also gave a tailwind to these once-battered stocks.

Winners within the U.S. bank ETF included Bank of America Corp., which surged 110 per cent; Regions Financial Corp., up 67 per cent and SunTrust Banks Inc., up 62 per cent. "U.S. banks are highly exposed to the U.S. economy, particularly the regional banks," said Alfred Lee, an investment strategist with BMO ETFs at BMO Global Asset Management.

U.S. bank stocks should benefit from a rebounding housing sector, a falling unemployment rate and a favourable monetary policy for business activity, Mr. Lee added. Bank stocks, he said, are still attractive because they trade at lower price-to-earnings ratios than the overall U.S. stock market.

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Beyond banks, the top 15 ETFs in the screen tracked an eclectic mix of sectors, ranging from real estate to Chinese stocks.

The iShares Global Real Estate ETF gained 25.4 per cent. It benefited from real estate exposure outside of North America and particularly in Asia, said Jeff Logan, head of iShares products at BlackRock Asset Management Canada Ltd. Big gainers in this ETF included Mitsubishi Estate Co. Ltd., Mitsui Fudosan Co. Ltd. and Sumitomo Realty & Development Co.

The iShares China All-Cap ETF posted a 22.1-per-cent return. Stocks that helped its performance included Tencent Holdings Ltd., Industrial & Commercial Bank of China Ltd. and CNOOC Ltd.

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