Natural Resources Continue to Push Canadian Equity Funds Higher in April, Morningstar Canada Data Show

TORONTO, May 2, 2014 /CNW/ - Following their strong showing in the first quarter of 2014, mutual funds in Canada that hold high stakes in natural resources stocks, including sector-specific and diversified Canadian equity funds, were the best performers in April. But while domestic equity funds did well, most foreign equity categories were in negative territory last month; fixed income and balanced funds generally produced modest gains. Thirteen of the 21 Morningstar Canada Fund Indices that measure the aggregate returns of equity funds were up during the month, though only four of them increased by 2% or more, according to preliminary performance numbers today released by Morningstar Canada.

The best-performing fund index for April was the one that tracks the Energy Equity category, which increased by 7.5%. The more diversified Morningstar Natural Resources Equity Fund Index was the second-best performer with a 5.2% increase.

"With global economic conditions improving, economists expect demand for resources to grow, which is positive for firms within these sectors," Morningstar Manager Research Analyst Achilleas Taxildaris said.

Funds in the Canadian Equity and Canadian Small/Mid Cap Equity categories, both of which have large allocations to natural resources, also benefited from this theme in April; their fund indices increased by 2.2% and 2%, respectively. The other sector-diversified domestic equity fund indices also posted strong results, with increases of 1.8%, 1.5%, and 0.9% for Canadian Dividend & Income Equity, Canadian Focused Equity, and Canadian Focused Small/Mid Cap Equity, respectively.

Among foreign equity funds, the only categories with positive results in April were Emerging Markets Equity, European Equity, and International Equity, all of which increased by 0.4%. The Asian equity fund categories were all negative for the month, pulled down by a combination of market losses and depreciating currencies versus the Canadian dollar. The worst performer overall was the Morningstar Greater China Equity Fund Index, which decreased by 4.5% as poor economic data presented questions about the level of the slowdown of the world's second-largest economy.

Also near the bottom of the performance table last month were the U.S. Equity and U.S. Small/Mid Cap Equity fund indices, with decreases of 1.2% and 2.1%, respectively. The S&P 500 Index, when measured in U.S. dollars, increased by 0.7% during the month, but the loonie's 0.9% appreciation versus the U.S. dollar more than offset that gain.

"The sharp decline in the pricey technology sector and, to a lesser extent, the biotechnology industry, affected U.S. equity funds and served as a reminder of the risks that come with investing at high valuations," Taxildaris said.

For more information about April 2014 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 individual investors, financial advisors, asset managers, and retirement plan providers and sponsors. Morningstar provides data on approximately 456,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 12 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 had approximately US$164 billion in assets under advisement and management as of March 31, 2014. The company has operations in 27 countries.

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SOURCE: Morningstar Research Inc.

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