Domestic funds flat in May

By Staff | June 4, 2014 | Last updated on June 4, 2014
2 min read

In early 2014, domestic equity funds performed well.

But that changed in May, according to data released by Morningstar, which analyzed the returns of its Canadian indices.

The company finds most of its Canadian equity funds benefitted from large allocation to natural resources in the first four months of the year. But the energy and materials sectors flatlined last month and weighed on domestic stocks.

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For example, Morningstar’s Canadian Domestic Equity Fund Index decreased by 0.2%. Similarly, funds in the precious metals equity, natural resources equity and energy equity categories ended the month with decreases of 6.7%, 2.4%, and 0.5%, respectively.

However, four other related indices increased marginally: the Canadian Focused Equity Index was up 0.1%; the Canadian Small/Mid Cap Equity index was up 0.2%; and the Canadian Focused Small/Mid Cap Equity Index and Canadian Dividend and Income Equity Index both increased by 0.5%.

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“Earlier this year, political uncertainty in Ukraine contributed to raising the prices of natural resources and precious metals, which abated last month with signs that tensions were calming between Russia and Ukraine,” says Morningstar fund analyst Joanne Xiao. “However, positive stock performance from the large Canadian banks, backed by strong corporate earnings, somewhat mitigated these losses for diversified Canadian equity funds.”

On the global front, Morningstar’s Asian funds saw a strong May, with increases in Greater China equity (3.1%), emerging markets equity (2.2%), and Asia-Pacific ex-Japan equity (1.8%). U.S. funds also increased, with the S&P 500 index increasing by 2.3% and the U.S. equity fund index going up by 1.6%.

In contrast, the company’s European Equity Fund Index decreased by 0.6%.

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Counter to domestic equity fund results, all six of the Morningstar Canada Fund Indices that track bond categories were positive last month, led by increases of 2.5% and 2.4% for the Canadian Long Term Fixed Income and Canadian Inflation-Protected Fixed Income indices. The Canadian Fixed Income and Global Fixed Income fund indices both increased by 1%, while High Yield Fixed Income and Canadian Short Term Fixed Income were up by 0.6% and 0.3%, respectively. staff


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