Equity Funds Bounce Back Strongly in October, Morningstar Canada Data Show

TORONTO, Nov. 2, 2011 /CNW/ - After five consecutive months of negative returns, equity funds in Canada produced strong gains in October as general optimism seemed to return—albeit temporarily—to the world's stock markets. All but one of the 22 Morningstar Canada Fund Indices that track equity categories had positive returns for the month, with 14 of them gaining 5% or more, according to preliminary performance data released today by Morningstar Canada.

"Equity markets had one of their biggest months in years, with the S&P/TSX Composite Index up over 5% and the S&P 500 up nearly 11%. This was due to positive growth numbers at home, and hopes that eurozone leaders had created a workable solution to the Greek debt crisis," said Morningstar Fund Analyst Adam Fisch. "However, the month ended on a sour note, as a selloff on Oct. 31 was followed by the surprising announcement of a Greek referendum on the proposed bailout. That news, accompanied by disappointing Chinese manufacturing numbers, sent stocks downward and cast doubts over the prospect of sustained recovery in the equity market."

Foreign markets for the most part outperformed their Canadian counterpart during the month, but for Canadian fund investors these solid performances were tempered by currency effects, with the Canadian dollar appreciating by more than 4 % against the U.S. dollar and many Asian currencies. As a result, the returns of the Morningstar Canada Fund Indices that measure foreign equity categories were much lower than the corresponding market benchmarks when expressed in local currency.

Among the major diversified foreign equity categories, the Morningstar U.S. Small/Mid Cap Equity Fund Index had the best return with 9%, while the indices that measure the Emerging Markets Equity, Greater China Equity and U.S. Equity categories gained 8.1%, 8.1% and 7.3%, respectively. The International Equity and Global Equity fund indices both gained 5.4% in October. The worst performer, and the only Morningstar Canada equity fund index to lose ground last month was Japanese Equity, which lost 4.1% despite positive results on Japanese stock markets; this was due to the yen's depreciation of 5.6% against the loonie.

The best-performing fund index overall was Natural Resources Equity, which gained 11.3%. "As fears subsided throughout the month, oil and precious metals rose on hopes of higher demand, buoyed by optimism in Europe. Production of oil in OPEC countries and in the United States rose in the month to keep up with anticipated increased demand, but the prospect of further instability in Europe could derail those plans and give back many of the month's gains," Fisch said.

Among Canadian equity funds, those that focus on smaller companies edged out the large-cap offerings. The Morningstar Canadian Small/Mid Cap Equity and Canadian Focused Small/Mid Cap Equity fund indices gained 7.1% and 6.4%, respectively, while the Canadian Focused Equity and Canadian Equity fund indices were up 5.7% and 5.6%, respectively.

For more on October 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
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 330,000 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 $167 billion in assets under advisement and management as of Sept. 30, 2011. The company has operations in 26 countries.

SOURCE Morningstar Research Inc.

For further information:

Adam Fisch, Fund Analyst, Morningstar Canada, (416) 484-7815; Christian Charest, Editor, Morningstar Canada, (416) 484-7817


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