Resource funds shine in April

By Staff | May 2, 2014 | Last updated on May 2, 2014
2 min read

Mutual funds with high stakes in natural resources stocks were top performers in April. But while domestic equity funds did well, most foreign equity categories were in negative territory.

Fixed income and balanced funds generally produced modest gains. Thirteen of the 21 Morningstar Canada Fund Indices that measure the aggregate returns of equity funds were up during the month, though only four of them increased by 2% or more, according to preliminary performance numbers from Morningstar.

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“With global economic conditions improving, economists expect demand for resources to grow, which is positive for firms within these sectors,” says Morningstar analyst Achilleas Taxildaris.

Funds in the Canadian equity and Canadian small- and mid-cap equity categories, both of which have large allocations to natural resources, also benefited in April; their fund indices increased by 2.2% and 2%, respectively. The other sector-diversified domestic equity fund indices also posted strong results, with increases of 1.8%, 1.5%, and 0.9% for Canadian dividend and income equity, Canadian-focused equity, and Canadian-focused small- and mid-cap equity, respectively.

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Among foreign equity funds, the only categories with positive results in April were emerging markets equity, European equity, and international equity, all of which increased by 0.4%. The Asian equity fund categories were all negative for the month, pulled down by a combination of market losses and depreciating currencies versus the Canadian dollar.

Near the bottom of the performance table last month were the U.S. equity and U.S. small- and mid-cap equity fund indices, with decreases of 1.2% and 2.1%, respectively. The S&P 500 Index, when measured in U.S. dollars, increased by 0.7% during the month, but the loonie’s 0.9% appreciation versus the U.S. dollar more than offset that gain.

“The sharp decline in the pricey technology sector and, to a lesser extent, the biotechnology industry, affected U.S. equity funds and served as a reminder of the risks that come with investing at high valuations,” Taxildaris says.

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The staff of have been covering news for financial advisors since 1998.