Investment funds that target the natural resources sectors more than made up for their poor showing in the first month of the year by posting strong results in February, according to preliminary performance data released today by Morningstar Canada.
The natural resources equity fund Index gained 9.8% for the month, which was easily the best return among the 42 Morningstar Canada fund indices.
“Rising prices in commodities like oil, gold and copper have helped bolster the returns of natural resources and precious metals funds,” said Jordan Benincasa, fund analyst for Morningstar Canada. The precious metals equity fund index had the second-best return in February with a 6.5% gain as gold prices reached new record highs.
The indices that measure the performance of domestic equity funds all had positive returns in February, with small-cap equity fund categories outpacing their larger capitalization counterparts. The Canadian small/mid cap equity fund Index was up 4.2% for the month, while Canadian focused small/mid cap equity and Canadian income trust equity both gained 3.7%. The Canadian equity fund index was up 3.2%, falling just shy of the 3.4% return posted by the S&P/TSX composite index.
Among foreign equity categories, the emerging markets equity fund Index had the best return with 3%, thanks in large part to another solid performance by the Brazilian stock market. The Asia Pacific ex-Japan equity fund Index had the only other positive result, up 0.2% on the strength of stock markets in Taiwan, Hong Kong and South Korea. Meanwhile, the fund indices that track the larger foreign equity categories all suffered losses: European equity was down 1.6%, international equity shed 2.4% and global equity dropped 3.4%. “Global financial institutions continue to report massive write downs stemming from business in the collapsing U.S. housing market,” Benincasa said.
The worst performing fund index in February was U.S. equity with a 5.3% loss, resulting from poor market performance by the S&P 500 (down 3.2% in U.S.-dollar terms), combined with a 2.3% appreciation of the Canadian dollar versus the U.S. currency. Since the spring of 2007, when the markets started to take notice of the severity of the credit crunch, the U.S. Equity fund index has lost more than 20% on a cumulative basis.
Final performance figures will be published on next week.