Equity funds lost power in February says Morningstar

Preliminary data shows currency effects helped foreign equity funds

Equity funds lost power in February says Morningstar
Steve Randall

Morningstar Canada says that only 7 of its 44 Canada Fund Indices increased in February and only by small margins.

The firm’s preliminary data shows that the 7 best performers only increased by 0.7% or less, while 12 of the 37 losers were off by at least 2%.

Those that tracked fixed-income categories were the top performers with the Floating Rate Loans Fund Index leading at 0.7%, while the Preferred Share Fixed Income Fund Index was the worst-performer among the fixed-income category with a 1% decrease.

Stock markets were down everywhere in the world in February with losses of 3-6% and all of Morningstar’s equity fund-tracking indices were down.

Canadian investors fared better with their foreign equity investments due to the depreciation of the loonie, which capped losses at 1%. However, domestic equity funds were among the worst performers according to the Morningstar data.

Asia-Pacific best performing equity, energy among worst
Morningstar’s Asia Pacific Equity index was the best performer among equities, with a 0.01% decrease.

The S&P 500 Index had a total return of -3.7% in February, but for Canadian investors the losses were mostly offset by the U.S. dollar's 4.2% appreciation against its Canadian counterpart, leading to a decrease of 0.6% for the fund index that tracks the U.S. Equity category.

The indices tracking energy, precious metals, and natural resources funds saw the largest losses (7.0%, 5.7%, and 5.3%, respectively).

Energy weighed on the Canadian market with a 2.8% decrease in the Morningstar Canadian Equity Fund Index. Despite the negative performance, domestic-equity funds still managed to surpass the benchmark S&P/TSX Composite Index's total return of -3.0%, owing in part to an underweight to energy stocks.

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