Weak but mostly positive performance for funds in August

Chinese equity funds continue to lead; struggling energy sector hampers Canadian equity funds.

Christian Charest 5 September, 2017 | 5:00PM
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Slow, steady and mostly positive was the order of the day for funds in Canada during the month of August, as 35 of the 44 Morningstar Canada Fund Indices, which measure the aggregate returns of funds in various standard categories, posted gains that, for all but five of those indices, were limited to less than 2%. On the other hand, eight of the nine fund indices with negative results were down by 1% or less, according to preliminary performance data released today by Morningstar Canada.

The best-performing fund index for the month was the one that tracks the Precious Metals Equity category, which gained 7.7%. This comes on the heels of four consecutive months of negative performance for that fund index, during which time it lost 7.2%.

The Morningstar Greater China Equity Fund Index was the second-best performer with a 3.9% increase, reflecting strong gains on the Hong Kong and Shanghai stock exchanges as well as well as a 2.5% appreciation of the Chinese currency relative to the Canadian dollar. Funds in this category continue to be the top performers in Canada so far in 2017, with an aggregate gain of 26% since the start of the year. Also benefiting from the strength of Chinese equities in August were funds in the Emerging Markets Equity, Asia Pacific Equity and Asia Pacific ex-Japan Equity categories, whose fund indices were all among the top performers with increases of 2.1%, 1.2% and 1.1%, respectively.

Domestic equity funds posted flat results in August, as the Canadian energy sector detracted from the overall stock market's results. The Morningstar Canadian Equity Fund Index increased 0.4% for the month, while the Canadian Focused Equity and Canadian Dividend & Income Equity fund indices were both up 0.1%. The benchmark S&P/TSX Composite Index had a total return of 0.7% in August, with two of the big-three sectors posting positive results: The S&P/TSX materials and financial services sub-indexes were up 5.5% and 0.3%, respectively, but the energy sub-index lost 3.9%.

The Morningstar U.S. Equity Fund Index increased 0.2% for the month, underperforming the S&P 500 Index which posted a total return of 0.6%. Currency effects were minimal but favourable to Canadian investors, as the U.S. dollar appreciated 0.4% against the loonie, amplifying the level of underperformance for the funds.

The worst-performing fund category in August was Energy Equity, whose fund index decreased 4.5%. Other equity categories in the red included Financial Services Equity, Natural Resources Equity and Canadian Small/Mid Cap Equity, down 1%, 0.8% and 0.4%, respectively.

Most fixed-income fund categories ended the month in positive territory. The best-performing fund indices for that asset class were the ones that track the Canadian Long Term Fixed Income and Canadian Inflation-Protected Fixed Income categories, up 2.9% and 2.1%, respectively, while the only ones in the red were Preferred Share Fixed Income, down 1.0%, and Floating Rate Loans, down 0.04%. The largest category in that group, Canadian Fixed Income, saw its fund index increase 1.2%.

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
Precious Metals Equity   7.7
Greater China Equity   3.9
Canadian Long Term Fixed Income   2.9
Emerging Markets Equity   2.1
Cdn Inflation-Protected Fixed Income   2.1
Global Infrastructure Equity   1.7
Asia Pacific Equity   1.2
Canadian Fixed Income   1.2
Asia Pacific ex-Japan Equity   1.1
Cdn Focused Small/Mid Cap Equity   1.1
Real Estate Equity   0.9
2030 Target Date Portfolio   0.7
2025 Target Date Portfolio   0.7
2035+ Target Date Portfolio   0.7
2035 Target Date Portfolio   0.6
Canadian Fixed Income Balanced   0.6
Global Fixed Income   0.6
Global Fixed Income Balanced   0.5
Global Neutral Balanced   0.5
Canadian Neutral Balanced   0.5
Short-Term Target Date   0.5
Global Equity Balanced   0.4
Tactical Balanced   0.4
Canadian Equity   0.4
Canadian Short Term Fixed Income   0.4
International Equity   0.3
U.S. Equity   0.2
High Yield Fixed Income   0.2
Canadian Dividend & Income Equity   0.1
Canadian Equity Balanced   0.1
Canadian Focused Equity   0.1
Global Equity   0.1
Canadian Money Market   0.0
European Equity   0.0
U.S. Money Market   0.0
Floating Rate Loans   -0.0
U.S. Small/Mid Cap Equity   -0.1
Global Small/Mid Cap Equity   -0.2
North American Equity   -0.2
Canadian Small/Mid Cap Equity   -0.4
Natural Resources Equity   -0.8
Financial Services Equity   -1.0
Preferred Share Fixed Income   -1.0
Energy Equity   -4.5
Data as of Aug. 31, 2017

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Christian Charest

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