TORONTO, Feb. 2, 2012 /CNW/ - The new year began in a very encouraging fashion for investment funds in Canada, with strong gains being posted in every equity, balanced and fixed income fund category in January. All 42 of the Morningstar Canada Fund Indices had positive results for the month, including increases of more than 2% for each of the 24 equity fund categories, according to preliminary performance data released today by Morningstar Canada.
The best-performing categories were those that invest in riskier asset types such as gold, emerging market equities, and small and mid-cap stocks. The top performer overall was the fund index that tracks the Precious Metals Equity category, which rose 12.2% for the month. It was followed by three of the regional equity categories normally considered among the most volatile: Emerging Markets Equity, Greater China Equity, and Asia Pacific Ex-Japan Equity, which saw increases of 9.2%, 8.7%, and 7.1%, respectively. Also faring exceptionally well were the Canadian Focused Small/Mid Cap Equity, Canadian Small/Mid Cap Equity, and Global Small/Mid Cap Equity categories, which rose by 6.1%, 5.3%, and 5%, respectively.
"Widespread strength in riskier asset categories is indicative of broader macro factors—rather than company-specific events—once again driving market movements. While there were a number of U.S.-listed companies that reported estimate-beating earnings, it's likely that steps toward a solution in Europe and accommodative central-bank policies had an outsized influence on the month's results," said Morningstar fund analyst Nick Dedes.
"Specifically, we saw yields on periphery European debt—with the exception of Portugal—decline as tighter budget controls were broadly put in place. We also saw the appearance of progress in talks regarding Greece's debt, and the European Central Bank extending unlimited loans to banks. In the United States, the Federal Reserve also changed key language around its intentions for maintaining exceptionally low rates, which is now likely through late 2014. Meanwhile, Chinese stocks gained in January likely because of speculation that slowing growth will prompt a loosening of monetary policy by the country's central bank and moves by the government to support domestic equities," Dedes said.
While equity funds that target the relatively safer developed markets underperformed their riskier peers, the corresponding indexes nevertheless produced higher-than-normal returns in absolute terms in January. The Morningstar International Equity Fund Index increased by 4.2% for the month, while the indices that measure the U.S. Equity, Global Equity, and Canadian Equity increased by 4.1%, 4%, and 4%, respectively. Even the beleaguered European Equity category was up 3.3% last month.
Fixed-income funds also posted gains across the board in January, which is unusual for a period when all segments of the equity markets do well. This may indicate that a portion of the investing public has less conviction in riskier assets and believes it appropriate to leave some money in the safety of bonds. The returns among the six fixed-income fund indices ranged from 0.3% for the Morningstar Canadian Short Term Fixed Income Fund Index to 2% for the Morningstar High Yield Fixed Income Fund Index.
For more on January 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 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.
For further information:
Nick Dedes, Fund Analyst, Morningstar Canada, (416) 484-7823; Christian Charest, Editor, Morningstar Canada, (416) 484-7817