Chinese equity funds continue to lead in July while most fund categories lose ground

Despite a rebound in the resources sectors, Canadian equity funds posted modest losses.

Christian Charest 2 August, 2017 | 5:00PM
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Funds in the Greater China Equity category have been the best performers in Canada so far in 2017, and that trend continued in July, according to preliminary performance data released today by Morningstar Canada. With a 3.5% gain, the Morningstar Greater China Equity Fund Index was the best performer among the 44 Morningstar Canada Fund Indices, which measure the aggregate returns of funds in various standard categories, and one of only 10 fund indices to post a positive result.

Thirty-four of the 44 fund indices lost ground during the month, with the losses in most cases limited to 2% or less, while nine of the 10 winning fund indices were up by less than 2.0%. Along with Greater China Equity, the only other sector-diversified fund category to post a positive result in July was Emerging Markets Equity, whose fund index increased 1.1%, while the Morningstar Asia Pacific Equity Fund Index was flat with 0.0%.

Fund indices representing three sector-specific equity categories were also among the top performers in July: Natural Resources Equity, Energy Equity and Financial Services Equity gained 1.8%, 1.3% and 0.1%, respectively. While the Financial Services Equity category has produced positive performance so far this year, Natural Resources Equity and Energy Equity have been the worst performers for the year to date, with their respective fund indices losing 11% and 19.6%.

Despite negative results, domestic equity funds were among the best performers in July. The Canadian Equity and Canadian Dividend & Income Equity fund indices both lost 0.5%, while the Morningstar Canadian Focused Equity Fund Index lost 0.8%. The benchmark S&P/TSX Composite Index had a total return of -0.1% for the month despite the country's three largest sectors -- financial services, energy and materials -- all posting gains. The industrials sector, with a loss of 3.4% for the month, was the biggest contributor to the negative performance.

The Morningstar U.S. Equity Fund Index decreased 1.2% for the month. U.S. stock markets did well in July, with the S&P 500 Index posting a total return of 2.1%, but the Canadian dollar's strong appreciation against its U.S. counterpart more than offset the gains for Canadian investors. Also suffering from this currency effect was the Morningstar U.S. Small/Mid Cap Equity Fund Index, which was the worst-performing equity fund category with a 2.3% loss.

Most fixed-income fund categories ended the month in the red, with domestic bond categories being hit particularly hard following the Bank of Canada's decision to raise its key interest rate on July 12. The Morningstar Canadian Long Term Fixed Income Fund Index was the worst performer among all fund categories with a 4.4% decrease, while Canadian Inflation-Protected Fixed Income was down 3.2%. The largest category in that group, Canadian Fixed Income, saw its fund index lose 1.7%. Two fixed income fund indices increased during the month: High Yield Fixed Income and Preferred Share Fixed Income were up 0.2% and 1.4%, respectively.

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 next week.


Fund Indices 1 month
Greater China Equity   3.5
Natural Resources Equity   1.8
Preferred Share Fixed Income   1.4
Energy Equity   1.3
Emerging Markets Equity   1.1
High Yield Fixed Income   0.2
Financial Services Equity   0.1
Canadian Money Market   0.0
Asia Pacific Equity   0.0
U.S. Money Market   0.0
Floating Rate Loans   -0.1
Asia Pacific ex-Japan Equity   -0.3
Global Fixed Income   -0.3
Canadian Short Term Fixed Income   -0.4
Canadian Dividend & Income Equity   -0.5
Canadian Equity   -0.5
International Equity   -0.6
Canadian Equity Balanced   -0.7
European Equity   -0.7
Canadian Focused Equity   -0.8
Global Infrastructure Equity   -0.9
Tactical Balanced   -0.9
Canadian Neutral Balanced   -1.0
Short-Term Target Date   -1.0
Precious Metals Equity   -1.0
Global Fixed Income Balanced   -1.1
Canadian Fixed Income Balanced   -1.1
Cdn Focused Small/Mid Cap Equity   -1.1
Global Neutral Balanced   -1.1
North American Equity   -1.2
U.S. Equity   -1.2
Global Equity Balanced   -1.2
Canadian Small/Mid Cap Equity   -1.3
2025 Target Date Portfolio   -1.4
2030 Target Date Portfolio   -1.4
Global Equity   -1.5
Real Estate Equity   -1.6
2035 Target Date Portfolio   -1.6
Canadian Fixed Income   -1.7
Global Small/Mid Cap Equity   -2.0
2035+ Target Date Portfolio   -2.2
U.S. Small/Mid Cap Equity   -2.3
Cdn Inflation-Protected Fixed Income   -3.2
Canadian Long Term Fixed Income   -4.4
Data as of July 31, 2017

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Christian Charest

Christian Charest  

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