Funds see higher returns, sales in June

(July 6, 2004) Mutual fund performance improved in June, with 21 of 32 Morningstar Canada fund indices advancing, up from 18 in May, according to the investment funds analyst firm.

Japanese equity funds were the top performers, with that index rising 3.6% in June. Japanese equity funds have also posted the best year-to-date performance, gaining 15.9%, despite earlier instability.

“Japanese equities shrugged off the possibility of a slowdown in China, inflationary concerns in the U.S. and some uncertainty in the world oil supply,” said Morningstar analyst Mark Chow. “Japan’s central bank delivered an extremely upbeat assessment of the economy during June, saying that higher industrial production and corporate profits are boosting employment, wages and consumer confidence.”

A second-place finish was posted by Canadian income trusts fund index, which gained 2.9%. Income trust-based funds have been recovering from a 5.5% loss in April, as talk of interest hikes intensified. Fears of rapid increases from the U.S. Federal Reserve subsided by June, however, and the Fed only hiked rates by 25 basis points.

“Fund investors weathered another volatile month amid an imminent interest-rate hike in the U.S. and persistent geopolitical instability,” said Chow. “High oil prices did not dominate the news in June as increased supply caused the price of crude to ease.”

At the bottom of the pack, precious metals funds lost 4.9% in June, as the price of gold waned. The gold funds index has accumulated a year-to-date loss of 20.2%, far overshadowing the second poorest performer, the Asia ex-Japan equity fund index, which is off just 1.2% for the first six months.

While funds were posting positive returns, investors continued to show confidence. IFIC is reporting preliminary sales data for June, showing new net sales between $150 million to $550 million.

“Net sales for the month of June are expected to be approximately $350 million,” said Tom Hockin, IFIC’s president and CEO. “History shows that sales for the month of June are typically slower than May.”

Net mutual fund assets are estimated to have grown to between $473 billion and $478 billion, up about 0.5% from the May total of $473.7 billion.

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