Pender Small Cap Opportunities Fund Not sure how well this will paste but the bottom line is that this was the top rated fund and SDE is the largest holding in the fund (4.9%). GLTA
Although precious metals equity funds produced higher returns, as a group they showed higher volatility than Canadian-focused small/mid-cap funds. (The latter category must hold between 50 per cent and 90 per cent Canadian companies that, on average, have a market capitalization of less than $7.2-billion). The small/mid-cap category is itself small, with only 19 funds (counting the oldest share classes only), but might offer choices for investors who wish to augment their core holdings with riskier domestic assets. To find winners that might have the capacity to outperform peers in the future, I screened this universe of 19 funds to look for those that have:
- A Morningstar Rating (informally known as the “star rating”) of four stars or better. Recall that Morningstar’s star rating is a look back at historical risk-adjusted returns after fees, relative to peers. The star ratings are not forward-looking, but our data show that over the past decade, five-star funds domiciled in Canada were less than half as likely to be liquidated or merged than one-star funds. The star rating is a great starting point for further research.
- A Morningstar Quantitative Rating of gold, silver or bronze. This is Morningstar’s forward-looking assessment of a fund’s ability to outperform in the future. In the years that the rating has been in existence we’ve found that as a group, medalist-rated funds have outperformed neutral or negatively rated funds, after receiving their ratings.
WHAT WE FOUND
The three funds that meet the above requirements are listed in the accompanying table alongside their ratings, management expense ratios, inception dates and trailing performance. As it happens, the one-year trailing period measured today coincides with the bottom of the market last year, which will lead to optically outsized returns over this time frame. Readers are reminded to not only consider the short-term trailing returns, but also what has happened in the more distant past. To this end, the past five years of calendar returns are also displayed in the table.
This article does not constitute financial advice. It is always recommended to speak with a financial adviser or investment professional before purchasing any of the products listed here.
Select Canadian-focused small/mid cap funds
| FUND | MORNINGSTAR QUANTITATIVE RATING | MORNINGSTAR RATING OVERALL | MER (%) | YTD TTL. RTN. (%) | 1Y TTL. RTN. (%) |
| Fidelity Greater Canada Sr F | Bronze | 5 Stars | 1.17 | 8.4 | 112.7 |
| Pender Small Cap Opportunities F | Gold | 5 Stars | 1.50 | 21.1 | 118.1 |
| Fidelity Special Situations Series F | Silver | 5 Stars | 1.11 | -0.9 | 103.3 |
Source: Morningstar Direct. Data as of March 23
| Top 10 Holdings | Fund (%) |
| Spartan Delta Corp. | 4.9 |
| Aviat Networks, Inc. | 4.3 |
| ProntoForms Corporation | 4.1 |
| Sangoma Technologies Corp. | 3.7 |