TORONTO, June 4, 2012 /CNW/ - All equity fund categories in Canada ended
May with losses, according to preliminary performance numbers today
released by Morningstar Canada. All 22 Morningstar Canada Fund Indices
that track the aggregate performance of equity fund categories were in
the red, and only eight of the total 42 indices constructed by
Morningstar posted flat or positive results for the month.
With most balanced funds also in negative territory, the best outcomes
showed up in fixed-income categories. "Investors continue to ignore the
prospect of rising rates and flock to the safety they perceive in fixed
income," Morningstar Fund Analyst Nick Dedes said. "That popularity is
driving yields lower and prices higher."
The Morningstar Canadian Long Term Fixed Income and Morningstar Canadian
Inflation-Protected Fund Indices led the way with increases of 4.1% and
3.9%, respectively, while the Canadian Fixed Income Index ranked third
with a return of 1.7%. Also in the black were Global Fixed Income
funds, which rose 0.8%, while the Canadian Short Term Fixed Income
Index rounded out the top-five list with a return of 0.5%.
Slight losses of 0.2% and 0.5% by the Real Estate Equity and Health Care
Equity Indices, respectively, were enough to make those two the best
performers among equity fund categories.
Turbulence was pervasive across equity markets and the high volatility
of certain other industry sectors was evident. Natural Resources Equity
funds fell 10.2% for the steepest and only double-digit loss among all
42 Morningstar fund indices. That decline reflected a plunge of 14% in
the price of Brent crude oil as concerns heightened about weakening
economic growth and the slowing demand for fuel.
The Morningstar Precious Metals Equity Index performed only slightly
better, declining 8.6% as the second-worst performer in the month. The
spot price of gold dropped a steep 6% in May.
The Morningstar Canada European Equity Index fell 7.8%, which was the
worst regional equity performance in the month. "There's a plethora of
headline news feeding investors' apprehension. The Spanish banking
system is under significant pressure, Greeks are heading back to the
polls after a failed attempt to form a ruling government, and there are
billions of trading losses out of J.P. Morgan, to name a few," Dedes
said. "It's not surprising to see capital fleeing riskier assets and,
to some extent, we've become accustomed to seeing security prices
largely influenced by headlines versus company fundamentals."
Spurred in part by this turbulence, most overseas markets also suffered
substantial losses. The Morningstar Japanese and Greater China equity
indices decreased 5.7% and 7%, respectively. Similar declines, ranging
from 5.7% to nearly 8%, were experienced by the indices that track the
more diversified mandates of Global Equity, Emerging Markets,
International Equity, Global Small/Mid Cap Equity, and Asia Pacific
The more advanced economies in North America were also not immune to the
turmoil. In Canada, where high levels of household debt and high home
prices have been singled out as areas for concern, the equity market
fell more steeply than in the United States. The index that tracks the
Canadian Equity Index fell 6%, compared with a decline of 4% for the
Morningstar U.S. Equity Index.
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 380,000 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 and has more
than US$190 billion in assets under advisement or management as
of March 31, 2012. The company has operations in 27 countries.
For more on May 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 data will be published on www.morningstar.ca next week.
SOURCE Morningstar Research Inc.
For further information:
Nick Dedes, Fund Analyst, Morningstar Canada, (416) 484-7823; Christian Charest, Editor, Morningstar Canada, (416) 484-7817.