TORONTO, June 4, 2013 /CNW/ - Solid performance in U.S. stock markets,
combined with a surging greenback, produced strong gains for U.S.
equity funds sold in Canada during the month of May. This also
reflected positively on other fund categories that have heavy
allocations to U.S. stocks. Meanwhile, domestic equity funds were back
in the black after producing negative returns in April. Twenty-six of
the 43 Morningstar Canada Fund Indices had positive results for the
month, including increases of more than 2% for 11 of the 22 equity fund
categories, according to preliminary performance data released today by
Morningstar Research Inc. (Morningstar Canada), a subsidiary of
independent investment research provider Morningstar, Inc.
The top-performing fund index in May was the one that measures the
aggregate performance of funds in the U.S. Small/Mid Cap Equity
category with a 4.9% increase for the month, followed closely by the
index that tracks the U.S. Equity category with 4.8%. While the S&P 500
Index of U.S. large-cap stocks did well with a 2.3% return for the
month, currency effects had a bigger impact for Canadian investors as
the U.S. dollar appreciated 2.7% versus the loonie.
"This marks the seventh straight month of gains for the S&P 500 and its
longest streak of monthly gains since 2009," said Morningstar Fund
Analyst Vishal Mansukhani. "Some of the outperformance can be
attributed to the increase in U.S. home sales, a higher-than-expected
rise in manufacturing for the month, and the highest U.S. consumer
sentiment level in nearly six years. But the main engine behind the
strong rally in U.S. equities has been monetary policy easing."
Fund categories that rely on U.S. equities to a large extent were also
among the top performers for May. The Morningstar Global Small/Mid Cap
Equity Fund Index, of which U.S. stocks are the largest component,
increased by 4.4% during the month, while the North American Equity and
Global Equity fund indices posted increases of 3.7% and 3.0%,
Funds that target the health care sector were also among the best
performers, with an average increase of 4.3%. Most of the funds in the
Health Care Equity category hold the majority of their assets in U.S.
"Health care has been one of the best-performing sectors in the United
States this year. These companies have been cutting costs, and there is
speculation of an expansion in insurance programs that will ultimately
benefit the sector. Estimates from the Congressional Budget Office
indicate that President Obama's health care legislation may extend
insurance over the next decade to approximately 27 million people who
are currently uninsured," Mansukhani said.
After dipping into negative territory in April, all five Morningstar
Canada Fund Indices that track Canadian equity categories posted
increases last month. The best performers were Canadian Focused
Small/Mid Cap Equity and Canadian Focused Equity, up 3.5% and 2.8%,
respectively, while Canadian Equity, Canadian Small/Mid Cap Equity, and
Canadian Dividend & Income Equity increased by 2.0%, 1.9%, and 0.9%,
After six consecutive months among the best performers, the Morningstar
Japanese Equity Fund Index ranked near the bottom with a 4.6% decrease.
Though Japan's Nikkei 225 Index only lost 0.6% in local currency terms,
the Japanese yen depreciated considerably versus other major
"Recent concerns about a slowdown in China detracted from the
performance of Japanese equities in May," Mansukhani said.
For more about 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 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
approximately 422,000 investment offerings, including stocks, mutual
funds, and similar vehicles, along with real-time global market data on
more than 9 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$157 billion in assets under advisement or management as of March 31,
2013. The company has operations in 27 countries.
©2013 Morningstar, Inc. All rights reserved.
SOURCE: Morningstar Research Inc.
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