TORONTO, Aug. 5 /CNW/ - Investment funds that have significant exposure
to commodities posted sharply negative returns in July, according to
preliminary performance data released today by Morningstar Canada. The
Morningstar Precious Metals Equity Fund Index lost 12.5% for the month, which
was the worst performance among the 42 Morningstar Canada Fund Indices.
But the story that affected the greatest number of Canadian investment
funds last month was the tumbling price of oil. Light crude peaked at US$147
on July 11 on the New York Mercantile Exchange, but had dropped to US$124 by
month end amid indications that global growth was slowing. Also, natural gas
prices went down by about 30% in July. As a result, the Morningstar Natural
Resources Equity Fund Index lost 12.4% for the month.
"Fuel consumption in the United States and Canada could continue to fall
as consumers feeling squeezed at the pump consider ways to reduce their
reliance on increasingly expensive oil products," said Al Kellett, fund
analyst for Morningstar Canada. "As for precious metals, there are a lot of
small-cap companies in this space, and many have struggled to keep themselves
adequately funded amid the broad credit contraction."
Falling energy prices also hurt sector-diversified Canadian equity funds.
The Morningstar fund indices that track the Canadian Equity, Canadian
Small/Mid Cap Equity and Canadian Focused Small/Mid Cap Equity categories lost
6.2%, 7.3% and 8.0%, respectively, for the month. The average funds in each of
these three categories allocate nearly half of their assets to natural
resources. Meanwhile, funds in the Canadian Income Trust Equity category,
which on average allocate 44% to the energy sector alone, collectively lost
5.9% in July.
Foreign equity funds also struggled last month but performed better than
their domestic counterparts. The Morningstar Global Equity Fund Index was down
1.4%, while the International Equity, European Equity and Emerging Markets
Equity fund indices lost 2.6%, 3.1% and 3.2%, respectively. The Morningstar
U.S. Equity Fund Index lost 0.6%, slightly outperforming its benchmark, the
S&P 500 Index, which lost 0.8% (in U.S.-dollar terms).
Only nine fund indices had positive returns for the month. The best
performer was Health Care Equity, which gained 5.9%. "Stock prices in this
sector were pushed higher in part by the announcement of several large merger
and acquisition transactions," Kellett said. "Roche bid almost US$44 billion
for the outstanding shares of Genentech, while Teva Pharmaceutical Industries
signaled its intention to purchase Barr Pharmaceuticals in a deal worth
US$7.5 billion. Although the health care sector has struggled during the
market downturn of the last 12 months, it is often considered a defensive play
that could weather a consumer-led slowdown better than most."
Only two other equity fund categories-both of them sector-specific-stayed
above water last month; Financial Services Equity had the second-best return
with a 3.4% gain, and Real Estate Equity was up 0.1%, ranking seventh. The
other winning fund indices all track fixed-income or money market categories.
For more on July fund performance, go to www.morningstar.ca.
Morningstar Canada's preliminary fund performance figures are based on
the 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 Canada and Morningstar, Inc.
Morningstar Canada is the Canadian subsidiary of Chicago-based
Morningstar, Inc., a leading provider of independent investment research. 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 more than 280,000 investment offerings, including
stocks, mutual funds, and similar vehicles. The company has operations in 18
countries and minority ownership positions in companies based in three other
For further information:
For further information: Al Kellett, Fund Analyst, Morningstar Canada,
(416) 484-7879; Christian Charest, Associate Editor, Morningstar Canada, (416)