Foreign Equity Funds Continue to Shine in January, Morningstar Canada Data Show
TORONTO, Feb. 4, 2013 /CNW/ - Positive momentum from 2012 continued for
investment funds in Canada into the first month of 2013, with strong gains
posted in most equity, balanced, and fixed income fund categories in January.
Thirty-seven of the 42 Morningstar Canada Fund Indices had positive results
for the month, including increases of more than 3% for 13 of the 24 equity
fund categories, according to preliminary performance data released today by
Several trends that were observed in the last few months of 2012 continued
into the new year. The best-performing fund index for the month of January, as
it was for the whole of 2012, was the one that measures the Health Care Equity
category with a 7% increase. Meanwhile, at the bottom of the table, the only
two equity fund indices to lose ground for the month were once again Natural
Resources Equity and Precious Metals Equity, which decreased by 0.1% and 7%,
"A combination of factors such as macroeconomic uncertainty, improving stock
fundamentals, and increasing consumer demand due to an aging population
contributed to the outperformance of the health care sector, which is
traditionally seen as defensive," said Morningstar Fund Analyst Joanne Xiao.
"Gold prices continued to face downward pressure and dropped more than 11% in
the month of January alone, adding to the 11% decline in 2012."
Another trend that carried over from last year was the dominance of foreign
equity funds over their Canadian-focused counterparts. The U.S. stock market
had an exceptionally good month in January, with the S&P 500 Index gaining
5.2%; coupled with favourable currency effects, this translated into an
average gain of 5.6% for funds in the U.S. Equity category, and 5.8% for the
U.S. Small/Mid Cap Equity category. Major European and Asian markets also had
a good month, leading to strong increases for the European Equity (4.6%),
International Equity (4.6%), Global Equity (4.5%), and Japanese Equity (3.9%)
Canadian equities continued to post strong gains in January, with the
financial services sector doing particularly well, but overall market
performance was once more dragged down by a lethargic resources sector and
failed to keep up with overseas markets. As a result, Canadian equity funds
produced returns that were good on an absolute basis but lagged other equity
categories. The Morningstar Canada Fund Indices that track the Canadian
Equity, Canadian Dividend & Income Equity, and Canadian Small/Mid Cap Equity
categories increased by 2.5%, 2.7%, and 2.9%, respectively. The Canadian
Focused Equity and Canadian Focused Small/Mid Cap Equity categories, which can
invest up to 50% in foreign stocks, did better with increases of 3.6% and
As was the case in December, the three fixed-income categories that target
intermediate and long-term bonds were in the red in January. The Morningstar
Canadian Fixed Income Fund Index decreased by 0.7% for the month, while
Canadian Long Term Fixed Income and Canadian Inflation-Protected Fixed Income
decreased by 2.2% and 2.6%, respectively.
"This was the worst month for Canadian Long Term Fixed Income and Canadian
Inflation-Protected Fixed Income funds since early 2011. Lower-than-expected
inflation numbers released by Statistics Canada had a negative impact on the
performance of real-return bond funds. Also, the Bank of Canada's long-term
bond yields ticked higher, which caused the DEX Long Term Bond Index to lose
2% for the month," Xiao said.
For more on January 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.
Joanne Xiao, Fund Analyst, Morningstar Canada, (416) 484-7004; Christian
Charest, Editor, Morningstar Canada, (416) 484-7817
SOURCE: Morningstar Research Inc.
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