Equity funds in Canada posted lacklustre performance in March, but most posted gains—many of them in the double digits—for the first quarter of 2012, according to preliminary performance numbers released today by Morningstar Canada.
Among the 22 Morningstar Canada fund indices that measure the aggregate performance of equity fund categories, eight indices increased by more than 10%, while only one had a negative result for the quarter.
“This was the first quarter in a long time where markets didn’t suffer from looming uncertainty over Europe, as the European Central Bank injected funds into regional banks in a hope to spur growth,” said Morningstar fund analyst Adam Fisch. “However, some fears have begun to emerge that further financing will be necessary, leading to some speculation that investors can expect lower growth in the coming months.”
The top performer for the quarter was the Morningstar U.S. equity fund index, which increased by 11.4%—its best result over any three-month period in more than a year.
“U.S. equities lead the way during the first quarter following encouraging data on housing, consumer spending and consumer sentiment,” Fisch said.
The second-best performer was the fund index that tracks the financial services equity category, with an 11.3% increase, followed by emerging markets equity, health care equity and global small/mid cap equity, which were up 11.1%, 10.9%, and 10.8%, respectively.
Most equity categories had solid returns in both January and February, but in March the results were negative for 10 of the fund indices. The best performers in March were the health care equity and financial services equity fund indices with increases of 4% each, followed by U.S. equity, with a 3.8% increase.
Some of the fund indices that lost ground in March still posted strong results for the quarter, such as Greater China equity, which decreased by 5.4% last month but ended the quarter up 6.9%.
Most domestic equity funds posted negative results in March due largely to the natural resources sectors, which make up nearly half the Canadian market and suffered significant losses last month. However, they still performed well over the quarter.
The Morningstar Canadian focused small/mid cap equity fund index led with an 8.6% increase over the past three months, while the indices that track the Canadian small/mid cap equity, Canadian focused equity and Canadian dividend and income equity categories were up 6.1%, 6.0%, and 4.6%, respectively.
The Morningstar Canadian equity fund index increased by 4.5% for the quarter, with most of the upswing coming in January.
The biggest losers in March were the natural resources equity and precious metals equity fund indices, which were down 8.4% and 10.6%, respectively. The former ended the quarter up a meagre 0.1%, while the latter was the only equity fund index to lose ground.
“More stability in the overall markets meant more of an appetite for risk, which often means less desire for the perceived safe haven of precious metals,” Fisch said. “In addition, the Indian government’s decision to double import duties on gold and the subsequent strikes by protesting Indian jewellers translated to less demand from one of the world’s largest gold importers.”