Equity funds post strong gains for second consecutive month, Morningstar data show

    TORONTO, May 4 /CNW/ - Investment funds in Canada continued the strong
upward trend that began in March by posting equally impressive results in
April. Just like in March, 20 of the 24 Morningstar Canada Fund Indices that
track equity categories gained 5% or more last month, with four of them
posting double-digit returns, according to preliminary performance data
released today by Morningstar Canada.
    The Morningstar Global Small/Mid Cap Equity Fund Index had the best
return with a 16.5% gain, while Emerging Markets Equity ranked fourth with a
10.6% gain. Funds in these two categories got a boost following the G-20
meeting early in the month, where world leaders outlined their plan for the
recovery and committed to, among other things, boosting the International
Monetary Fund's resources by US$750 billion. "Despite a still gloomy economic
outlook, risk-taking returned to the markets as investors pushed up the prices
of smaller companies and emerging market equities, and rotated out of
defensive areas such as gold and health care," said Esko Mickels, fund analyst
for Morningstar Canada.
    The other fund indices that gained more than 10% in April measure the
performance of two sector-specific fund categories that were among the most
severely battered last year: Financial Services Equity and Real Estate Equity
were up 16.1% and 12.9%, respectively, for the month. Financials were once
again the main drivers of performance for the North American equity markets.
In Canada, the S&P/TSX Capped Financial Index rose 16.7%, while in the United
States the Financials sub-index of the S&P500 did even better with a 22.2%
gain. "Bank earnings largely surprised analysts and provided a catalyst for
the sector," Mickels said. "Net income at the combined Bank of America and
Merrill Lynch was US$4.2 billion, the combined operations of Wells Fargo and
Wachovia generated US$3 billion, and Citigroup managed US$1.6 billion."
    Another sector-specific fund category that is profiting from the
turnaround is Science & Technology Equity, whose fund index gained 8.8% last
month after posting a 9.2% return in March. "Smart phone makers Apple and
Research In Motion reported year-over-year increases in profits of 15% and
26%, respectively, as sales pushed higher, particularly at RIM where revenue
was up 84%," Mickels said.
    Among sector-diversified domestic equity fund categories, small-cap funds
outperformed their larger-cap counterparts. The Canadian Small/Mid Cap Equity
and Canadian Focused Small/Mid Cap Equity fund indices gained 8.9% and 8.1%,
respectively, while the Canadian Focused Equity and Canadian Equity fund
indices were up 7.6% and 7.4%, respectively.
    Foreign equity markets had an exceptional month in April, with many major
stock indexes like Germany's DAX, Hong Kong's Hang Seng and Brazil's BOVESPA
each posting returns of more than 14%. But for Canadian fund investors these
returns were diminished by currency fluctuations, which saw the Canadian
dollar rise by more than 5% against the U.S. dollar, the euro the Hong Kong
dollar and the Japanese yen, among others. As a result, the European Equity,
International Equity, U.S. Equity and Global Equity fund indices posted gains
of 6.9%, 6.9%, 5.4% and 4.9%, respectively.
    For more on April 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

    Morningstar Research Inc. is a 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 300,000 investment offerings, including
stocks, mutual funds, and similar vehicles, along with real-time global market
data on more than 4 million equities, indexes, futures, options, commodities,
and precious metals, in addition to foreign exchange and Treasury markets. The
company has operations in 19 countries and minority ownership positions in
companies based in three other countries.

For further information:

For further information: Esko Mickels, Fund Analyst, Morningstar Canada,
(416) 484-7815; Christian Charest, Associate Editor, Morningstar Canada, (416)

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