TORONTO, Sept. 2, 2011 /CNW/ - Equity funds suffered the worst of their
now four-month-long slump in August, as weak economic data and a
historic debt downgrade in the United States pushed world markets
downward. All but one of the 23 Morningstar Canada Fund Indices that
track equity categories posted losses for the month, with 12 of them
losing more than 5%, according to preliminary performance data released
today by Morningstar Canada.
The worst-performing fund index was the one that measures the European
Equity category, which lost 8% in August. "The tribulations in Europe
started a few years ago with the peripheral countries of Iceland,
Ireland and Greece. Now there is fear that troubles may be spreading to
the core as Italy and Spain came under pressure, prompting the European
Central Bank to step in and purchase the government bonds of these
countries," said Morningstar Fund Analyst Salman Ahmed.
"These fears worsened when Germany, considered the stalwart in the
region, released disappointing GDP growth numbers due to a slowdown in
exports," Ahmed said. Germany's DAX stock index lost 19.2% for the
month, while major indexes in France (CAC 40) and the United Kingdom
(FTSE 100) lost 11.3% and 7.2%, respectively, when measured in local
currencies. For Canadian fund investors, these losses were tempered by
currency effects, with the Canadian dollar depreciating against both
the euro (2.6%) and the pound sterling (1.4%).
Things weren't much better on this side of the Atlantic, where the S&P
500 Index lost 5.4% in August. "There was a sharp decline at the start
of the month due to consistently poor economic news and an
unprecedented downgrade of U.S. debt by rating agency Standard and
Poor's from the AAA to AA+. This prompted the Federal Reserve to commit
to two years of low rates to try to help markets. Investors reacted
positively to the news, but markets still ended this volatile month
deep in negative territory," Ahmed said. Canadian investors in this
segment once again benefited from the weakening loonie, which dropped
2.5% against the U.S. dollar, and the Morningstar U.S. Equity Fund
Index closed the month with a 4.8% loss.
Among the major diversified foreign equity categories, the Morningstar
Global Equity Fund Index lost 5.5%, while the indices that measure the
Asia Pacific Equity, Emerging Markets Equity and International Equity
categories lost 5.2%, 6% and 7.4%, respectively.
Domestic equity funds generally outperformed their foreign counterparts,
with the Morningstar Canadian Equity Fund Index posting a relatively
tame 1.9% loss for the month. This result reflected both a sharp drop
in one of Canada's major sectors—energy—and a significant gain in
another: materials. The S&P/TSX sub-index that tracks the latter sector
gained 5.1% for the month, boosted by solid performances from the major
The best performer among the 43 Morningstar Canada Fund Indices—and the
only equity-based index with a positive return—was the one that tracks
the Precious Metals Equity category, which gained 4.8% in August. Only
four other fund indices produced gains for the month, all of them
tracking fixed income categories, with returns ranging from 0.5% to
1.7%. "As is usually the case during times of market uncertainty,
investors flocked to the safe havens of gold and government bonds,"
For more on August 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.
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 Internet, software, and print-based
products and services for individuals, financial advisors, and
institutions. Morningstar provides data on approximately 400,000
investment offerings, including stocks, mutual funds, and similar
vehicles, along with real-time global market data on more than 5
million equities, indexes, futures, options, commodities, and precious
metals, in addition to foreign exchange and Treasury markets.
Morningstar also offers investment management services and has more
than $180 billion in assets under advisement and management as of June
30, 2011. The company has operations in 26 countries.
SOURCE Morningstar Research Inc.
For further information:
Salman Ahmed, Fund Analyst, Morningstar Canada, (416) 484-7821; Christian Charest, Editor, Morningstar Canada, (416) 484-7817