European Equity Funds Surge in April, Morningstar Canada Data Show

TORONTO, May 3 /CNW/ - Solid returns on the major European stock markets combined with a depreciating Canadian dollar to make investment funds in the European Equity category the best performers in Canada last month. Other foreign equity fund categories also gained in April, while domestic equity funds struggled and ended the month in the red, according to preliminary performance data released today by Morningstar Canada.

Overall, 31 of the 44 Morningstar Canada Fund Indices had positive returns in April, including 14 of the 24 indices that track equity fund categories. The best performer, the Morningstar European Equity Fund Index, gained 5.1% for the month. "Strong corporate earnings from European firms and impressive manufacturing growth led to broad-based gains across the region's markets. German companies led the way, pushing the DAX Index up 6.7% for the month. It was also encouraging to see robust results from major luxury good manufacturers and retailers such as LVMH, Burberry, and Christian Dior," said Morningstar Fund Analyst Nick Dedes.

Also among the leaders were the fund indices that track the International Equity (2.9%), Asia Pacific ex Japan Equity (2.8%), and Global Equity (1.8%) categories. Although these funds have exposure to markets that performed very well last month, currency movements also played a major part. "Despite the run-up in commodity prices, the Canadian dollar lost ground against major currencies including the euro, British pound, and Japanese yen. Some currency experts have suggested that one reason is the slower growth experienced by our major trading partner to the south, while other commodity-influenced currencies like the Australian dollar enjoy strong trading ties to the robustly growing Chinese market," Dedes said.

One currency against which the loonie did not depreciate was in fact the U.S. dollar, and this had negative consequences for funds in the U.S. Equity category. Despite the S&P 500 Index of large U.S. companies returning a decent 3% last month (when measured in U.S. dollars), the Morningstar U.S. Equity Fund Index was up only 1.1%, owing in part to the Canadian dollar's 2.4% rise against its U.S. counterpart.

Domestic equity funds did not have a good month in April, with all six fund indices posting losses ranging from 0.6% for the Morningstar Canadian Dividend & Income Equity Fund Index to 1.3% for the Morningstar Canadian Equity Fund Index. "News of domestic GDP unexpectedly contracting in February may have weighed down the markets, along with slower-than-forecast growth for the United States. The continued strength of the Canadian dollar relative to the U.S. dollar also remains a burden for many domestic exporters, while at the sector level, technology and financials struggled significantly. Research in Motion was punished by investors after lowering its earnings guidance, and Canadian banks pulled back after a nice run in the first quarter," Dedes said.

For more on April fund performance, go to

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 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 390,000 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 nearly $140 billion in assets under advisement and management as of March 31, 2011. The company has operations in 26 countries.

SOURCE Morningstar Research Inc.

For further information:

Nick Dedes, Fund Analyst, Morningstar Canada, (416) 484-7823; Christian Charest, Editor, Morningstar Canada, (416) 484-7817

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