Energy stocks rebound in September, boosting Canadian equity funds

Most equity categories had positive results in the third quarter of 2017.

Christian Charest 3 October, 2017 | 5:00PM

Mutual funds in Canada had another slow and steady month in September, resulting in positive performance for most categories. Twenty-nine of the 44 Morningstar Canada Fund Indices, which measure the aggregate returns of funds in various standard categories, moved up during the quarter, including 11 indices that gained 2% or more, while five of the 15 fund indices with negative results were down by 1% or more, according to preliminary performance numbers released today by Morningstar Canada.

The best-performing fund index for the third quarter was the one that tracks the Greater China Equity category, which increased 8.1%. This fund category has dominated the Canadian marketplace since the beginning of the year, including chart-topping performances in July and August, but its September result was a middling 0.5%.

Three sector-specific fund categories were among the top performers. The Morningstar Energy Equity Fund Index had the second-best result for the quarter with a 6.8% gain, which included a 10.3% increase in September that was the best among all categories for the month. The Natural Resources Equity and Financial Services Equity fund indices followed with increases of 4.1% and 3.9%, respectively, for the quarter and were ranked third and second for the month of September, up 3.1% and 4.9%, respectively.

Aided by strong results in the energy and financial services sectors, funds that invest in Canadian stocks had a solid month in September and ended the quarter among the best performers. The Morningstar Canadian Equity Fund Index, which has struggled so far in 2017, increased 3.1% for the month and 3.0% for the quarter, while the Canadian Dividend & Income Equity and Canadian Focused Equity fund indices were up 2.6% and 2.5% for the month, and 2.3% and 1.7% for the quarter, respectively.

The Morningstar U.S. Equity Fund Index increased 2.1% for the month, matching the S&P 500 Index's total return. For the quarter, the fund index underperformed with a 1.1% increase, compared to a 4.5% total return for the benchmark, owing to a significant appreciation of the Canadian dollar against its U.S. counterpart in July. Currency effects were minimal in August and September.

Only four fund indices representing equity categories were in the red for the quarter, two of which are comprised of sector-specific funds. The Morningstar Global Infrastructure Equity Fund Index was down 0.5% for the three-month period, while Real Estate Equity was down 0.9%. The other two losing fund indices were U.S. Small/Mid Cap Equity and Global Small/Mid Cap Equity, which decreased 0.3% and 1.1%, respectively.

The biggest losers in the third quarter were fixed-income fund categories, with four of eight fund indices ending the period in negative territory. The fund indices that track the Canadian Fixed Income, Canadian Inflation-Protected Fixed Income and Canadian Long Term Fixed Income categories lost 1.8%, 3.2% and 4.3%, respectively. The best-performing fund indices within the fixed-income asset class were Preferred Share Fixed Income, up 2.0%, and High Yield Fixed Income, up 0.8%.

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 Sept Q3
Greater China Equity 0.5 8.1
Energy Equity 10.3 6.8
Natural Resources Equity 3.1 4.1
Financial Services Equity 4.9 3.9
Canadian Equity 3.1 3.0
Asia Pacific Equity 1.4 2.6
Emerging Markets Equity -0.7 2.6
Canadian Dividend & Income Equity 2.6 2.3
Cdn Focused Small/Mid Cap Equity 2.4 2.2
European Equity 2.8 2.1
Preferred Share Fixed Income 1.7 2.0
International Equity 2.1 1.8
Canadian Focused Equity 2.5 1.7
North American Equity 2.6 1.3
U.S. Equity 2.1 1.1
Canadian Equity Balanced 1.8 1.1
High Yield Fixed Income 0.4 0.8
Global Equity 2.0 0.5
Asia Pacific ex-Japan Equity -0.4 0.4
Tactical Balanced 0.8 0.4
Global Equity Balanced 1.2 0.4
Canadian Small/Mid Cap Equity 2.2 0.4
Precious Metals Equity -5.9 0.4
Canadian Neutral Balanced 0.8 0.3
Floating Rate Loans 0.4 0.2
U.S. Money Market 0.0 0.2
Global Fixed Income -0.3 0.1
Global Neutral Balanced 0.7 0.1
Canadian Money Market 0.0 0.1
2035 Target Date Portfolio 1.0 -0.0
2030 Target Date Portfolio 0.6 -0.1
U.S. Small/Mid Cap Equity 2.2 -0.3
Global Fixed Income Balanced 0.1 -0.4
Short-Term Target Date 0.1 -0.4
Global Infrastructure Equity -1.3 -0.5
Canadian Short Term Fixed Income -0.4 -0.5
Canadian Fixed Income Balanced 0.0 -0.5
2025 Target Date Portfolio 0.2 -0.5
Real Estate Equity -0.2 -0.9
Global Small/Mid Cap Equity 1.1 -1.1
2035+ Target Date Portfolio 0.4 -1.2
Canadian Fixed Income -1.3 -1.8
Cdn Inflation-Protected Fixed Income -2.0 -3.2
Canadian Long Term Fixed Income -2.7 -4.3
Data as of Sept. 30, 2017

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Christian Charest

Christian Charest