Positive results for most fund categories in May

European, emerging markets equity funds among the few to post modest losses.

Christian Charest 4 June, 2018 | 5:00PM

Funds in almost every category in Canada posted decent gains in May, according to preliminary performance data released today by Morningstar Canada. Forty-two of the 47 Morningstar Canada Fund Indices, which measure the aggregate returns of funds in various standard categories, produced gains during the month, with most indices increasing between 1% and 3%.

The top performer among the 47 Morningstar Canada Fund Indices in May was the Morningstar Greater China Equity Fund Index, which was up 3.4% following losses in each of the three previous months. Funds that invest in the broader Asian region did not fare as well due to negative performances for stocks in Japan and South Korea, as measured by the Nikkei 225 Index and the KOSPI Index which were down 1.2% and 3.7%, respectively. The fund index that tracks the Asia Pacific ex-Japan Equity category gained just 1.4%, while Asia Pacific Equity was up 1.2%.

Diversified domestic equity funds had their best monthly results of the year so far, as the three main sectors of the Canadian economy -- financial services, energy and materials – all posted healthy gains. The S&P/TSX Composite Index produced a 3.1% total return for the month, and funds in the Canadian Equity category collectively returned 2.8%. The best-performing of the five domestic equity fund indices was the one that tracks the Canadian Focused Small/Mid Cap Equity category, which gained 3.0% in May, while Canadian Dividend & Income Equity, Canadian Focused Equity and Canadian Small/Mid Cap Equity were up 1.9%, 1.8% and 1.8.%, respectively.

Funds that invest in U.S. stocks were also among the best performers in May. The Morningstar U.S. Small/Mid Cap Equity Fund Index gained 3.1% while the fund index that tracks the larger-cap U.S. Equity category gained 3.0%. The S&P 500 Index had a total return of 2.4% for the month, but Canadian investors also benefited from a 0.9% appreciation of the U.S. dollar versus its Canadian counterpart.

For the second month in a row, the worst-performing fund category was Emerging Markets Equity with a 2.1% loss. Funds in this category typically allocate about three-quarters of their portfolios to Asian equities, which had middling results in May, but they also hold on average around 10% in Latin American stocks, which had a disastrous month. Brazil's BOVESPA Index took a 10.9% tumble, while Mexico's IPC Index dropped 7.6%. These losses were compounded by currency effects, which saw the Brazilian real and the Mexican peso depreciate by 5.6% and 5.3%, respectively, against the Canadian dollar.

The Morningstar European Equity Fund Index finished the month near the bottom of the rankings with a 1.6% loss. The negative result was mostly due to currency movements, as both the euro and the pound depreciated by 2.5% against the loonie. Stocks in Europe produced mixed results last month, with the United Kingdom's FTSE 100 gaining 2.2% and France's CAC40 losing 2.2%.

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.

Fund Indices 1 month
Greater China Equity   3.4
Natural Resources Equity   3.2
U.S. Small/Mid Cap Equity   3.1
Cdn Focused Small/Mid Cap Equity   3.0
U.S. Equity   3.0
Canadian Long Term Fixed Income   2.9
Canadian Equity   2.8
Real Estate Equity   2.5
Energy Equity   2.0
North American Equity   2.0
Canadian Dividend & Income Equity   1.9
Canadian Focused Equity   1.8
Canadian Small/Mid Cap Equity   1.8
Cdn Inflation-Protected Fixed Income   1.7
2035+ Target Date Portfolio   1.6
Asia Pacific ex-Japan Equity   1.4
Canadian Neutral Balanced   1.3
Asia Pacific Equity   1.2
Global Equity   1.2
2030 Target Date Portfolio   1.1
Preferred Share Fixed Income   1.1
Global Small/Mid Cap Equity   1.1
Global Equity Balanced   1.1
Global Neutral Balanced   1.1
Precious Metals Equity   1.0
Canadian Equity Balanced   1.0
Tactical Balanced   0.9
Financial Services Equity   0.8
2025 Target Date Portfolio   0.8
2035 Target Date Portfolio   0.8
Canadian Fixed Income Balanced   0.7
Canadian Fixed Income   0.7
Global Fixed Income Balanced   0.6
Canadian Corporate Fixed Income   0.4
Short-Term Target Date   0.4
Global Corporate Fixed Income   0.4
Global Infrastructure Equity   0.3
Floating Rate Loans   0.2
U.S. Money Market   0.2
Canadian Short Term Fixed Income   0.1
Canadian Money Market   0.1
High Yield Fixed Income   0.0
Global Fixed Income   -0.4
International Equity   -0.6
European Equity   -1.6
Emerging Mkt Fixed Income   -1.9
Emerging Markets Equity   -2.1
Data as of May 31, 2018

 

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Christian Charest

Christian Charest