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Most Equity Funds Post Negative Returns in April, Morningstar Canada Data Show

TORONTO, May 2, 2012—After posting solid returns during the first three months of 2012, most equity funds in Canada were in negative territory in April, according to preliminary performance numbers released today by Morningstar Canada. Among the 22 Morningstar Canada Fund Indices that measure the aggregate performance of equity fund categories, only four managed to stay positive last month. Balanced funds for the most part had flat or slightly negative returns.

Within the diversified equity categories, funds that invest outside of Canada typically had a harder time than their domestic counterparts in April. The Morningstar Japanese Equity Fund Index, one of the worst performers, decreased by 3.9% but still outperformed the benchmark Nikkei 225 Index’s 5.6% loss thanks to the appreciation of the yen versus the Canadian dollar. Also near the bottom were the fund indices that track the European Equity, Emerging Markets Equity, Global Equity, and International Equity categories, with pullbacks ranging from 2.2% to 2.8%.“Concerns about Europe weighed heavily on global equities, specifically with Spain in the spotlight following downgrades to its sovereign debt rating and the credit rating of several Spanish banks. The list of countries in the region with shrinking economies continues to lengthen,” said Morningstar Fund Analyst Nick Dedes.

North American equity markets were also in the red last month but the losses were much milder. Both the SandP/TSX Composite Index in Canada and the SandP 500 Index in the United States lost 0.6%, which was the same return posted by the Morningstar Canadian Equity Fund Index. However, Canadian holders of U.S. equity funds also had to contend with a depreciation of the U.S. dollar versus the loonie, which resulted in a decrease of 1.4% for the Morningstar U.S. Equity Fund Index for the month. Elsewhere, the Canadian Small/Mid Cap Equity and Canadian Focused Small/Mid Cap Equity fund indices decreased by 1.9% and 1.3%, respectively, while the Morningstar Canadian Dividend and Income Equity Fund Index was one of only four equity fund indices to go up in April; it eked out a 0.2% increase.

The best performing fund index in April was the one that measures the Real Estate Equity category, which increased by 3.5% thanks to strong gains by real estate investment trusts (REITs). “The relative attractiveness of REIT distributions continues to draw yield-seeking investors to these securities. Improvements in occupancy rates, along with low Canadian bond yields pushing down capitalization rates, have also bolstered the sector’s performance,” Dedes said. The other equity fund indices that posted increases for the month were Greater China Equity (1.6%) and Health Care Equity (0.2%).

For a third consecutive month, the worst performer among all fund indices was Precious Metals Equity, which decreased by 7.3%. “With no immediate indications of additional quantitative easing from the recent Federal Reserve open market statement, the price of gold has continued to drop. A number of economists expect movements in the price of bullion to remain in large part tied to decisions around monetary policy stimulus from the Fed or European Central Bank in the near-term,” Dedes said.

For more on April fund performance, go to

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
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 individuals, financial advisors, and institutions. Morningstar provides data on approximately 375,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 8 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services and has more than US$190 billion in assets under advisement and management as of March 31, 2012. The company has operations in 27 countries.

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