Fund returns soar in third quarter

By Steven Lamb | October 4, 2010 | Last updated on October 4, 2010
2 min read

Unusually strong stock market gains in September helped to boost third quarter mutual fund returns, according to data from Morningstar Canada. In fact, every fund index tracked by the research firm posted a positive return for the quarter.

Among the 24 indexes that track equity funds, half managed double digit returns over the past three months. The Morningstar Real Estate Equity Fund Index led the pack, with a gain of 17%, followed by Morningstar Emerging Market Equity Fund Index, up 15.5%, and European Equity, which gained 15.4%.

The Asia Pacific ex-Japan Equity index gained 14.4%, while the Asia Pacific Equity index was up. 11.4%. The Greater China Equity index gained 9.3%.

“Companies in emerging markets raised US$138 billion through initial public offerings and additional share sales. This included a record offering from Brazil’s Petrobras and a US$22.1-billion IPO from Agricultural Bank of China,” said Nick Dedes, fund analyst for Morningstar Canada. “Chinese manufacturing has also been expanding at a swift pace recently, giving support to the view that the country’s growth is stable.”

A pair of Canadian equity fund indexes also posted double-digit gains, with the Canadian Focused Small/Mid Cap Equity index and Canadian Small/Mid Cap Equity index gaining 11% and 10.4%, respectively.

The broad Canadian Equity index gained 9%, while Canadian Focused Equity grew by 8.1%.

American equity funds roared back to life in September, as U.S. stock markets posted their best returns for that month in nearly 70 years. Unfortunately, currency fluctuations trimmed some of the returns, according to data from Morningstar Canada.

The S&P 500 was up 8.9% at the end of the month, for example, but the soaring Canadian dollar reduced the gains in the Morningstar U.S. Equity Fund Index to 6.1%, and 7.6% for the third quarter.

“Indications of further quantitative easing in the United States from Federal Reserve Chairman Ben Bernanke in August helped spur equity market activity,” said Dedes. “In some cases, even the lack of downward surprises with respect to U.S. economic data has been enough to encourage investors to move into riskier assets once again, especially considering the low yields of fixed-income alternatives.”


Steven Lamb