Foreign Equity Funds Posted Solid Performance in 2012, Morningstar Canada Data
TORONTO, Jan. 3, 2013 /CNW/ - Equity funds in Canada ended 2012 with mostly
positive returns, with strong performances from those that target European and
Asian markets in particular. Canadian equity funds were also in positive
territory for the year but lagged their foreign counterparts, according to
preliminary performance numbers released today by Morningstar Canada.
The Morningstar Canada Fund Indices that measure the aggregate returns of
funds in the European Equity, Asia ex-Japan Equity, Greater China Equity, and
Asia Pacific Equity categories were among the best performers with increases
of 18.3%, 16%, 15.5%, and 15%, respectively, in 2012. Also posting
double-digit increases for the year were the International Equity, Emerging
Markets Equity, Global Equity, and U.S. Equity fund indices.
The five domestic equity fund indices posted increases ranging from 5% for the
Morningstar Canadian Small/Mid Cap Equity Fund Index to 8.1% for the
Morningstar Canadian Dividend and Income Equity Fund Index. While these
numbers were respectable on an absolute basis, they were among the weakest
relative to other sector-diversified fund indices in 2012.
The Canadian equity market exhibited a stark contrast between a red-hot
financial services sector and poorly performing energy and materials sectors;
together these three industry groups account for nearly 80% of the S&P/TSX
Composite Index. The financials sector in Canada increased by 17.1% in 2012,
while energy and materials were down 4.8% and 5.7%, respectively, as measured
by the S&P/TSX sub-indices.
Sector-specific fund indices were prominent among both the best and worst
performers for the year. First overall was the Morningstar Health Care Equity
Fund Index with a 20.6% increase, while Real Estate Equity and Financial
Services Equity also fared well with increases of 17% and 15.2%, respectively.
As was the case in 2011, the worst performer among all Morningstar Canada Fund
Indices in 2012 was the one that tracks the Precious Metals Equity category,
which declined 14.5%. "The price of gold dropped more than 10% for the year,
as investors moved into equities in spite of a rash of worrying headlines
about European defaults and the United States going over the fiscal cliff,
neither of which came to fruition," said Morningstar Fund Analyst Adam Fisch.
The only other fund index in the red for the year was Natural Resources
Equity, which decreased by 10.6%. "Commodity prices were hurt this year as
fears of a slowdown in the Chinese economy scared investors away from the
resources sectors," Fisch said.
For the month of December, the top-performing fund index was Japanese Equity,
whose 6.1% one-month increase allowed it to climb out of negative territory
and finish the year with a 4.1% increase. Throughout the year, currency
effects played a very important part in the performance of funds in this
category on two levels. Whenever the yen appreciated versus the Canadian
dollar, Canadian funds that invest in Japanese equities benefited, and vice
versa; however, an increasing yen often hurt Japanese companies, many of which
depend strongly on exports, and this resulted in losses for these stocks.
Thus, from a Canadian investor's point of view, the fund index's performance
reflects a total gain of 23.8% for the Nikkei 225 Index in 2012, combined with
a 13.1% depreciation of the yen versus the loonie.
For more on 2012 fund performance, go to www.morningstar.ca.
Morningstar Canada's preliminary fund performance figures are based on change
in funds' net asset values per share during the month, and do not necessarily
include end-of-month income distributions. Final performance figures will be
published on www.morningstar.ca next week.
About Morningstar Research Inc. and Morningstar, Inc.
Morningstar Research Inc. is a Canadian subsidiary of Chicago-based
Morningstar, Inc., a leading provider of independent investment research in
North America, Europe, Australia, and Asia. The company offers an extensive
line of products and services for individuals, financial advisors, and
institutions. Morningstar provides data on more than 385,000 investment
offerings, including stocks, mutual funds, and similar vehicles, along with
real-time global market data on more than 8 million equities, indexes,
futures, options, commodities, and precious metals, in addition to foreign
exchange and Treasury markets. Morningstar also offers investment management
services through its registered investment advisor subsidiaries and has
approximately US$195 billion in assets under advisement or management as of
Sept. 30, 2012. The company has operations in 27 countries.
Adam Fisch, Fund Analyst, Morningstar Canada, (416) 484-7815; Christian
Charest, Editor, Morningstar Canada, (416) 484-7817
SOURCE: Morningstar Research Inc.
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