After languishing for several years prior to the broader market downturn in late 2008, it seems like Canada’s small/mid-cap segment is on the move again. For the year ended December 31, 2009, Canadian focused small/mid-cap equity funds’ average yield of 43.0% ranked fifth among all fund categories; in December 2009 alone they ranked third with a 5.1% return, outperforming even the erstwhile high-flying precious metal and natural resource fund categories.

After a battering that cost them almost half their value last year, Canadian small/mid-cap stocks – and the funds that invest in them – have been staging a strong comeback this year. For the one-year period ended October 31, 2009, small/mid-cap funds ranked sixth in performance among all fund categories, with an average 29.3% yield; for the three-month period through October they ranked second behind only natural resource equities, with an average 12.4% return.

What a difference a few months can make, especially for real estate funds. After suffering one of the worst performances of any fund category during the 2008 market meltdown and posting -41% average losses for the year through March 2009 (exceeded only by natural resource funds at -42.6%), this group of funds has rebounded to post the second-best category performances since then.