May 2016 fund performance

Funds in Morningstar's Global Equity category suffer from underweights to the U.S. and some top-performing sectors in May 2016.

Anum Siddiqui 14 June, 2016 | 5:00PM
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Anum Siddiqui: For, I'm Anum Siddiqui and this is your May 2016 fund performance report.

This month we'll be looking at the global equity market, which actually had its strongest return of the year thus far. The MSCI World Index returned 5.1%, whereas the All Country World Index, which includes emerging markets, returned 4.7%. These returns are in Canadian dollars, and currency definitely had an impact on returns as the loonie declined against most major currencies. Most notably, the loonie declined versus the U.S. dollar by 4.2%.

Of the regions that make up the MSCI World Index, the U.S. was a top performer; however, the European and Asian equity markets also had a positive impact on returns. From a sector perspective, the information technology sector was one of the top performers. This sector is actually less sensitive to interest rate changes, and over the month, investors had increased their expectations about potential hike in interest rates.

Morningstar's global equity category underperformed the MSCI World Index by approximately 1% in May. This wasn't entirely surprising as the funds that make up the category, on average, have an underweight to the U.S. and were actually underweight some of the more top performing sectors.

The Silver-rated CI Black Creek Global Leaders Fund underperformed both the benchmark and category over the month of May. The underperformance was due to a combination of regional and sector exposures, as well as stock selection decisions. Black Creek Global Leaders is one of those funds that fall into that bucket where they have a significant underweight to the U.S., and this put a damper on their monthly returns. Furthermore, they are overweight the weaker-performing industrial sector and had a relatively higher cash position as the markets did well. However, on a year-to-date basis, the Black Creek Global Leaders Fund has outperformed both the benchmark and its category. Its overweight to the industrials, as well as stock selection decisions, have contributed to this outperformance.

Over the month of May, the Gold-rated Mawer Global Equity Fund outperformed both the benchmark and its peer group. The fund outperformed despite the fact that it was actually underweight the U.S. and underweight the top-performing information technology sector. All of the outperformance was due to positive stock selection, primarily within the financial and healthcare sectors. The fund has a similar story over the year-to-date period. It has outperformed both the benchmark and category for this time, primarily due to stock selection decisions within the financial sector. Financial names such as Aon, Markit Limited, Brookfield Asset Management, BlackRock and S&P Global have all contributed to the positive returns over the year-to-date.

Lastly, we'll look at the CI Cambridge Global Equity Fund, which marginally underperformed the benchmark, but actually outperformed its peers. The fund benefited from positive stock selection; however, it had a relatively high cash position of close to 10%, which was a damper on returns. Furthermore, from a regional perspective, the global equity fund has an overweight allocation to Canadian equities. Canadian equities lagged its foreign counterparts over the month of May; therefore, this overweight was also a damper on returns.

Looking ahead in June, the Federal Reserve will announce whether or not they will increase interest rates, and we’ll also have a final word on Brexit as United Kingdom will vote to decide whether or not they will leave the European Union. Both events could have a potential impact on financial markets.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Aon PLC Class A315.97 USD1.51Rating
BlackRock Inc810.31 USD0.60Rating
Brookfield Corp Registered Shs -A- Limited Vtg55.34 CAD2.56
S&P Global Inc434.84 USD2.48Rating

About Author

Anum Siddiqui

Anum Siddiqui  Anum Siddiqui is an analyst on Morningstar Canada’s manager research team.

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