Funds returns soft through Q2 despite June rally

Mutual fund performance was pretty dismal in the second quarter despite a June rally in many categories, according to Morningstar Canada. Just three out of 31 fund indices had a positive return for the three months ended June 30 — Canadian and U.S. money markets, and the real estate index.

The real estate index managed to earn investors 3.5% in the second quarter, making it the top performer in that period, while the U.S. money market and Canadian money market indices returned 0.7% and 0.6%, respectively.

Indices reflecting the “core” holdings for many Canadians were grouped around the middle of the pack. The Canadian balanced fund index slipped 3.1%, while investors lost 4.4% in the Canadian equity (pure) index and 4.6% in the standard Canadian equity index.

The worst performance for the quarter was turned in by the science and technology index, which fell 12.0% in the quarter, followed by the Japanese equity index, off 10.8%.

The month of June on its own marked a recovery for many fund indices that were laid low in May’s equity market sell-off. Real estate again led the pack with a gain of 2.8%, followed by European equity and emerging markets equity, which gained 1.1%. The healthcare, international equity and Asia (ex-Japan) indices all gained 1.0% in June.

The Canadian equity (pure) index remained weak, falling 1.2%, while the Canadian equity index dropped 1.0%. The Canadian balanced index slipped 0.5%.

The worst performing indices in June were Canadian small cap equity, which lost 4.2%, followed by a 1.9% decline in the natural resources index.

Meanwhile, IFIC estimates that mutual fund sales for the month of June will likely be around $200 million. Based on a sample of preliminary data from some of its members, net new sales for the month of June are estimated to be between minus $50 million and positive $450 million, IFIC said.

“Shaky markets kept investors on the sidelines in June,” said IFIC president Joanne De Laurentiis. “And like the markets, mutual fund assets declined marginally.”

Net assets for June are estimated to be in the range of $586 to $591 billion, down approximately 0.4% from the previous month.

Among firms, BMO Mutual Funds led the way with net sales of $165 million, followed by TD Asset Management at $138 million and Dynamic at $133 million.

Laggards included AIM Trimark, down $349 million, CIBC Asset Management, off $139 million, Franklin Templeton, down $96 million and AIC, with net redemptions of $86 million.

Filed by Steven Lamb, Advisor.ca, steven.lamb@advisor.rogers.com