Slumping Loonie Boosts Foreign Equity Funds in 2015, Morningstar Canada Data Show

TORONTO, Jan. 5, 2016 /CNW/ -- Morningstar Research Inc., a Canadian subsidiary of Chicago-based independent investment research provider Morningstar, Inc. (NASDAQ: MORN), today released preliminary 2015 year-end performance data for its 42 Morningstar Canada Fund Indices, which measure the aggregate returns of funds in various standard categories. Twenty-nine of the 42 Fund Indices increased during the year, including nine indices that increased 10% or more.

Highlights from Morningstar's 2015 year-end preliminary performance report include:

  • The year's top-performing fund index was the one that tracks the European Equity category, which increased 19.0%. The nine top-performing fund indices were all in foreign equity categories, including Global Small/Mid Cap Equity, International Equity, Asia Pacific Equity, and Global Equity, which were up 18.8%, 13.8%, 12.4%, and 11.9%, respectively.
  • As the Canadian dollar depreciated sharply against virtually all major world currencies in 2015, currency effects played a large role in foreign equity category returns. Market results measured in local currency were mixed in Europe, with France's CAC40 Index and Germany's DAX Index increasing 8.5% and 9.6%, respectively, while London's FTSE 100 Index was down 4.9%. However, the loonie dropped 6.6% versus the euro and 11.5% against the British pound, which benefited Canadian fund investors who had exposure to European equities.
  • Market performance was similarly mixed in Asia, where increases of more than 9% for the Shanghai Composite Index and Japan's Nikkei 225 contrasted with losses of 7.2% and 10.4% for stock indexes in Hong Kong and Taiwan, respectively. But the loonie's double-digit depreciation against the Chinese yuan, Hong Kong dollar, and Japanese yen boosted returns for Canadians holding Asian equities in their funds.
  • U.S. stocks were relatively flat in 2015, with the S&P 500 Index increasing just 1.4% for the year. But after factoring in the loonie's 16.2% depreciation against the U.S. dollar, funds in the U.S. Equity and U.S. Small/Mid Cap Equity categories produced healthy results, as the fund indices of both categories increased 13%. The performance of individual funds within these and all other foreign equity categories will vary greatly depending on each fund's currency hedging policy. Funds that hedge their currency exposure will have significantly underperformed those that do not over the past year.
  • Without the benefit of favourable currency effects, domestic equity funds were among the worst performers last year, with all five domestic equity fund indices posting negative results. Among that group, the best performer with a 0.7% decrease was the fund index that tracks the Canadian Focused Equity category, whose constituent funds can invest up to half of their holdings in foreign stocks. The worst performer was the Canadian Equity fund index, down 6.2%. The energy and basic materials sectors were the main detractors from performance for Canadian equity funds over the past year, as both sectors declined more than 20%.
  • Not surprisingly, funds that specifically target natural resources were the worst performers overall in 2015. In a year that saw a persistent decline in the price of oil and other commodities, funds in the Natural Resources Equity and Energy Equity categories decreased 21.8% and 24.6%, respectively.

To view the complete report about Morningstar's preliminary 2015 performance data for Canadian funds, please visit

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 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 more than 500,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 17 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 investment advisory subsidiaries, with more than US$170 billion in assets under advisement or management as of Sept. 30, 2015. The company has operations in 27 countries.

©2016 Morningstar, Inc. All rights reserved.


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SOURCE Morningstar Research Inc.

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