Real estate funds steal the show in August, Morningstar Canada data show

    TORONTO, Sept. 2 /CNW/ - Foreign equity funds once again had a strong
showing in August, thanks in large part to solid returns in the European and
U.S. markets. But it was the Real Estate Equity category-one of the smallest
in the Canadian fund universe with just 21 unique mandates-that stole the
show. Domestic equity funds had mixed results for the month, while a slumping
Chinese market was the only real negative story.
    Forty of the 43 Morningstar Canada Fund Indices advanced during the
month, led by the Morningstar Real Estate Equity Fund Index and its 8.4% gain.
"A string of positive housing data helped underpin strength in real estate
equities for August. Results of new and existing U.S. home sales outpaced
expectations as buyers took advantage of government tax credits and deep
discounts in the foreclosure market to help pare existing inventory and create
pricing pressure in the sector," said Neal Brandon, fund analyst for
Morningstar Canada. "Building on previous strength, the Canadian housing
market showed continued signs of growth with a broadly based advance in prices
across major markets."
    The second-best performing fund index was the one that tracks the
European Equity category, which is up 7.3% on solid gains in major markets
like France, Germany and the United Kingdom, combined with a 2.1% pullback of
the Canadian dollar against the euro. "Unexpected reports of second-quarter
GDP growth in Germany and France contributed to renewed optimism in the
eurozone, as the region's two largest economies officially marked an end to
the painful recession," Brandon said.
    Meanwhile, the Morningstar U.S. Equity Fund Index also had a good month
with a 4.7% return thanks to a combination of market performance and currency
effects. The S&P 500 Index gained 3.6%, while the U.S. dollar appreciated by
1.6% versus the loonie. The strength of Europe and the United States also
benefited broader equity fund categories: the Global Small/Mid Cap Equity,
International Equity, and Global Equity fund indices gained 5.9%, 5.6% and
3.9%, respectively.
    Among funds that focus on Canadian equities, those that target
small-capitalization stocks significantly outperformed their large-cap
counterparts. The Morningstar Canadian Small/Mid Cap Equity Fund Index gained
4.8% for the month, ranking fifth among all fund indices, and the Morningstar
Canadian Focused Small/Mid Cap Equity Fund Index was up 4.2%. Meanwhile, the
Canadian Focused Equity and Canadian Equity fund indices finished much farther
down the performance table with gains of 1.4% and 0.7%, respectively. After a
highly volatile start to the year, the three largest sectors of the S&P/TSX
Composite Index-financial services, energy, and materials-had their most
subdued month so far, with each sub-index either gaining or losing less than
    The worst-performing fund index last month was Greater China Equity with
a 5.9% loss. However, fund managers in that category were, in large part, able
to navigate around the Shanghai Composite Index's 21.8% drop, its largest
monthly loss since October 2008. "Chinese equities suffered a meaningful
setback in August as speculation persisted over tighter lending conditions in
the region. Investor optimism was derailed by reports that Chinese authorities
were beginning to rein in credit markets, dimming short-term growth prospects
and helping to erase the last three months of gains for that index," Brandon
    For more on August fund performance, go to

    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 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 nearly 325,000 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: Neal Brandon, Fund Analyst, Morningstar Canada,
(416) 484-7821; Christian Charest, Associate Editor, Morningstar Canada, (416)

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