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Another Solid Month for Equity Funds in February, Morningstar Canada Data Show

TORONTO, March 2, 2012—After a strong start to the new year in January, investment funds in Canada had another solid showing in February. All but one of the 24 Morningstar Canada Fund Indices that track equity categories had positive results for the month, including increases of more than 2% for 18 of them, and all 11 balanced fund indices were also in the black, according to preliminary performance data released today by Morningstar Canada.

Foreign equity markets generally outperformed their Canadian counterpart last month, and as a result foreign equity funds dominated the rankings. The best performer among all Morningstar Canada Fund Indices was the one that measures the European Equity category, which rose by 5%. This reflected the impressive returns posted by the major European benchmarks, notably Germany’s DAX Index, France’s CAC40 and the United Kingdom’s FTSE 100, which gained 6.1%, 4.7%, and 3.3%, respectively. Other top-performing foreign fund indices included Japanese Equity (4.6%), Global Equity (4.1%), Asia Pacific Equity (4%), and International Equity (4%).

“In Europe, investors were relieved as Greece received its second tranche of funding,” said Morningstar Fund Analyst Salman Ahmed. “And in Japan, a depreciating yen increased investor confidence in the ability of manufacturing firms to competitively price their goods. Even with the yen’s nearly 8% depreciation against the Canadian dollar, Japanese equities were among the best performers globally for Canadian investors.”

Among domestic equity funds, the Morningstar Canadian Equity Fund Index rose by 1.7% in February, matching the return of the SandP/TSX Composite Index. Funds in the Canadian Focused Equity category, which can invest up to half of their portfolios in foreign stocks, did better with an average gain of 2.4%. Funds that invest in smaller Canadian companies outperformed large-cap funds, with the Canadian Focused Small/Mid Cap Equity and Canadian Small/Mid Cap Equity fund indices posting increases of 4.1% and 3.4%, respectively.

The financial services sector was the main contributor to domestic equity portfolios’ positive returns, with the SandP/TSX Capped Financials Index rising 3.6%. Financials represent about 29% of the typical fund in the Canadian Equity category. The second largest sector, energy, also did well with a 2.3% return. “Increasing tensions between Iran and Israel pushed up the price of oil during the month. Crude oil was up more than 9% in U.S.-dollar terms. This helped keep the energy sector in the black,” Ahmed said.

The worst performer among all Morningstar Canada Fund Indices, and the only equity fund index to finish the month in the red, was Precious Metals Equity, which decreased by 1.9%. “The precious metals category took a beating in February largely due to the fall in gold and silver prices on the last day of the month. Investors interpreted Ben Bernanke’s comments to the U.S. Congress to mean that the Federal Reserve would not partake in another round of quantitative easing. This reduced inflation expectations and the prices of precious metals that serve as inflation hedges,” Ahmed said.

For more on February fund performance, go to www.morningstar.ca.

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 www.morningstar.ca 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$180 billion in assets under advisement and management as of Dec. 31, 2011. The company has operations in 27 countries.

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