Morningstar: Canadian funds lose ground

(October 15, 2003) Canadian mutual funds gave back some of the gains made in the past five months, as Morningstar Canada revealed that only 11 of 32 Morningstar Canada Fund Indices posted gains in September.

Nearly 80% of the funds tracked by Morningstar remain in positive territory on a year-to-date basis, thanks in large part to the gains made in July and August. Ninety per cent of funds made money in July, with August’s performance not far behind with 86% advancing.

“Fund indices for bonds and precious metals were the primary beneficiaries of the weakness in the U.S. dollar,” said Gareth Tingling, Morningstar Canada’s manager of fund research. “Currency effects hurt foreign equity returns and worked in favour of Canadian content.”

Tingling points out that the setback is not severe, with most of the declining Morningstar indices losing less than 1%. Those that shed 3% or more suffered due to high exposure to “U.S. stocks with rich valuations.

“With valuations for most Canadian stocks below those of their American counterparts, Canadian equity fund managers investing in Canadian content need not be too alarmed,” he said.

The top performing index in September was the precious metals index, with a 2.6% return. The worst losses were racked up by the U.S. small cap equity index, with a loss of 4.9%.

Mackenzie continues to have the highest number of five-star funds, with 10 in total, excluding clone funds. TD Mutual Funds, AIM Trimark Investments, Franklin Templeton Investments and Investors Group rounded out the top five fund firms on the same criterion.

• • •

Check out the Morningstar tools available on Advisor.ca. Find “Morningstar Tools” on the left-hand column under “Power Tools” or click here for a list of online tools available.

Filed by Steven Lamb, Advisor.ca, slamb@advisor.ca