What are we looking for? Canadian precious metal equity funds The screen As the global tariff situation continues to change rapidly, investors are likely reeling from the fluctuations in their portfolios. In times of volatility, one asset class (aside from cash) tends to attract attention as investors naturally seek safety in times of stress: gold. Historically, gold acts as a hedge to inflation and is less correlated to other asset classes offering diversification effects. This said, investors should be mindful that while gold can provide a buffer against market volatility, it is not immune to price swings. Hence, a balanced approach, incorporating gold as part of a diversified portfolio, might help mitigate risks while capitalizing on its potential benefits during turbulent times. To this end, today we look at precious metal equity funds, which invest in producers of gold and other precious metals, making them riskier investments with greater volatility than the physical asset, but are less correlated to broad equity markets. Today in Canada, there are 22 unique precious metal equity funds (when we strip away the multiple share classes). To look for some potential ideas to augment your portfolio during times of volatility, I used Morningstar Direct to screen for the best performing of this group. I did this using a single metric, the Morningstar Rating for funds (informally known as the “star rating”). As a reminder, the star rating is simply a look back at risk-adjusted returns after fees against peers. In this case, the peer group would be the 22 funds mentioned above. Though the rating is backward-looking, Morningstar’s data show that, on average, funds that receive a five-star rating end up outperforming those that have four stars, three stars, etc. in periods after receiving the rating. In other words, good fund managers tend to continue to perform well. Today’s screen looks for four- or five-star-rated funds, indicating that historically these funds have outperformed their peers. What we found Top performers in precious metals Name MER (%) Morningstar Rating Overall Morningstar Medalist Rating Total Ret YTD (%) Total Ret 1 Yr (%) Total Ret Annlzd 3 Yr (%) Total Ret Annlzd 5 Yr (%) Total Ret Annlzd 10 Yr (%) Inception Date Canadian Equity (%) U.S. Equity (%) International Equity (%) Fixed Income (%) Cash (%) Other (%) Dynamic Precious Metals Series F 1.30 5 Stars Gold 48.9 84.3 17.5 22.4 20.9 2007-01-12 60.8 0.0 38.8 0.0 0.6 -0.2 BMO Equal Weight Global Gold ETF (ZGD-T) 0.60 4 Stars Neutral 44.4 69.5 19.3 18.6 14.3 2012-11-14 75.0 13.7 11.5 0.0 0.0 -0.2 RBC Global Precious Metals Fund F 0.99 4 Stars Gold 45.0 66.6 11.6 14.7 15.5 2001-08-13 80.3 6.5 10.9 0.0 2.4 0.0 CIBC Precious Metals Cl F 1.03 4 Stars Negative 44.6 63.1 14.6 2020-07-06 73.6 12.3 11.8 0.0 1.9 0.4 Mackenzie Precious Metals F 1.05 4 Stars Bronze 42.5 59.1 13.1 17.8 17.7 2001-09-20 62.9 0.6 30.3 0.0 0.9 5.3 IG Mackenzie Global Precious MetalsF 1.07 4 Stars Neutral 41.9 58.6 13.5 17.8 17.7 2013-07-12 62.5 0.6 30.1 0.0 1.5 5.3 BMO Precious Metals F 1.10 4 Stars Negative 43.3 64.8 14.7 13.2 13.5 2013-06-24 79.3 10.5 5.8 2.1 2.4 0.0 Canada Life Precious Metals F 1.11 4 Stars Bronze 42.5 59.7 13.2 17.7 17.6 2013-08-16 62.9 0.6 30.3 0.0 0.9 5.3 CI Precious Metals F 1.23 4 Stars Neutral 40.3 64.5 11.6 19.8 12.8 2005-07-28 68.5 9.3 21.0 0.2 0.4 0.6 Source: Morningstar Direct The eight funds (and one ETF) that met the above screen are listed in the table accompanying this article, including their ratings, management expense ratios, trailing returns, inception dates and asset allocations. Though the Morningstar Medalist rating was not included in the screening criteria, I’ve displayed it here with the intent of highlighting funds that Morningstar believes will outperform peers in the future, based on a qualitative assessment of people (the tenure and track record of the fund managers), process (the consistency of the process and risk-management techniques used) and parent (the stewardship qualities of the fund company). Medalist-rated funds (gold, silver and bronze) are those that Morningstar expects to outperform their peers in the future on an after-fee basis. To facilitate comparability, I’ve opted to display only the fee-based share classes of qualifying funds, though many of these funds have multiple share classes. This article does not constitute financial advice. Readers are encouraged to conduct their own independent analysis before buying or selling any of the ETFs listed here. Ian Tam, CFA, is director of investment research for Morningstar Canada. Be smart with your money. Get the latest investing insights delivered right to your inbox three times a week, with the Globe Investor newsletter. Sign up today.