Most mutual fund categories lost ground in June: Morningstar

Aside from the two fund indices that track money market categories, the only fund indices that increased during the month were preferred share fixed income, up 3.3%, and financial services equity, up 2.9%.

The worst performers for the month were natural resources equity, European equity, and energy equity, which decreased by 3.7%, 4.2%, and 5.6%, respectively.

The best-performing fund index for the quarter was the one that tracks the Greater China equity category, which increased 5.7% over the three-month period even with a 1.9% drop in June. Funds in that category were bolstered by strong performance on the Hong Kong stock market, where the Hang Seng Index gained 6.9% over three months. “Despite adverse currency effects, Greater China equity funds have been the best performers in Canada so far in 2017, collectively gaining 17.1% over the first six months,” Morningstar says in its announcement.

All foreign equity fund indices were among the best performers for the quarter. The fund indices that track the European equity, Asia Pacific ex-Japan equity, international equity, and Asia Pacific equity categories posted increases of 4.5%, 4.1%, 3.8%, and 3.2%, respectively. In all cases, most of the gains were realized in April, while results were more modest in May and negative in June.

The U.S. equity fund index posted a middling 0.7% increase for the quarter, reflecting upticks of 2.9% in April and 0.3% in May, and a decrease of 2.4% in June. The S&P 500 index had a total return of 3.1% during the quarter, Morningstar says, but the appreciation of the Canadian dollar against its U.S. counterpart over that period — including a 4% increase in June — offset most of the positive performance. The U.S. small/mid cap equity fund index did slightly better with a 1.2% increase for the quarter.

In Canada, the S&P/TSX composite index was in negative territory in both May and June, ending the quarter down by 1.6%.

The Canadian equity fund index followed the same pattern but outperformed the benchmark with a 1.3% decrease.

As it did in the first quarter, the energy sector suffered heavy losses in April, May, and June and was the biggest detractor to the overall Canadian market, as the S&P/TSX capped energy index lost 13.3% for the quarter.

The financial services sector provided some relief in June, with the sub-index gaining 2.5%, but it ended the quarter in the red, down 0.9%.

Funds in the energy equity category were once again the worst performers in the second quarter; the fund index that tracks the category decreased by 12.6%, following a 9.2% decrease in the previous quarter.

The index that tracks the natural resources equity category was the second-worst performer with an 8.9% decrease. The precious metals equity fund index followed with a 6.2% decrease.

Most fixed-income fund categories had positive results during the quarter. The Canadian long term fixed income fund Index was the top performer in that group with a 3.9% increase, while Canadian short term fixed income was the only fund index in the red, down 0.3%. The other fixed income fund indices all posted increases between 0.3% and 1.1%.

Morningstar Canada’s preliminary fund performance figures are based on change in funds’ net asset values per share during the month, and do not necessarily include end-of-month income distributions. Final performance figures will be published next week.

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