Fund Investing

Most equity categories had positive results in the third quarter of 2017.
By Christian Charest | 03/10/17

Mutual funds in Canada had another slow and steady month in September, resulting in positive performance for most categories. Twenty-nine of the 44 Morningstar Canada Fund Indices, which measure the aggregate returns of funds in various standard categories, moved up during the quarter, including 11 indices that gained 2% or more, while five of the 15 fund indices with negative results were down by 1% or more, according to preliminary performance numbers released today by Morningstar Canada.

About the Author
Christian Charest is the editor responsible for Web sites at Morningstar Canada. He has been in the investment industry since 1995, having previously worked for Laurentian Bank and Merrill Lynch Canada. He holds a BBA in finance from the École des Hautes Études Commerciales in Montreal.

The best-performing fund index for the third quarter was the one that tracks the Greater China Equity category, which increased 8.1%. This fund category has dominated the Canadian marketplace since the beginning of the year, including chart-topping performances in July and August, but its September result was a middling 0.5%.

Three sector-specific fund categories were among the top performers. The Morningstar Energy Equity Fund Index had the second-best result for the quarter with a 6.8% gain, which included a 10.3% increase in September that was the best among all categories for the month. The Natural Resources Equity and Financial Services Equity fund indices followed with increases of 4.1% and 3.9%, respectively, for the quarter and were ranked third and second for the month of September, up 3.1% and 4.9%, respectively.

Aided by strong results in the energy and financial services sectors, funds that invest in Canadian stocks had a solid month in September and ended the quarter among the best performers. The Morningstar Canadian Equity Fund Index, which has struggled so far in 2017, increased 3.1% for the month and 3.0% for the quarter, while the Canadian Dividend & Income Equity and Canadian Focused Equity fund indices were up 2.6% and 2.5% for the month, and 2.3% and 1.7% for the quarter, respectively.

The Morningstar U.S. Equity Fund Index increased 2.1% for the month, matching the S&P 500 Index's total return. For the quarter, the fund index underperformed with a 1.1% increase, compared to a 4.5% total return for the benchmark, owing to a significant appreciation of the Canadian dollar against its U.S. counterpart in July. Currency effects were minimal in August and September.

Only four fund indices representing equity categories were in the red for the quarter, two of which are comprised of sector-specific funds. The Morningstar Global Infrastructure Equity Fund Index was down 0.5% for the three-month period, while Real Estate Equity was down 0.9%. The other two losing fund indices were U.S. Small/Mid Cap Equity and Global Small/Mid Cap Equity, which decreased 0.3% and 1.1%, respectively.

The biggest losers in the third quarter were fixed-income fund categories, with four of eight fund indices ending the period in negative territory. The fund indices that track the Canadian Fixed Income, Canadian Inflation-Protected Fixed Income and Canadian Long Term Fixed Income categories lost 1.8%, 3.2% and 4.3%, respectively. The best-performing fund indices within the fixed-income asset class were Preferred Share Fixed Income, up 2.0%, and High Yield Fixed Income, up 0.8%.

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 on next week.


Fund IndicesSeptQ3
Greater China Equity0.58.1
Energy Equity10.36.8
Natural Resources Equity3.14.1
Financial Services Equity4.93.9
Canadian Equity3.13.0
Asia Pacific Equity1.42.6
Emerging Markets Equity-0.72.6
Canadian Dividend & Income Equity2.62.3
Cdn Focused Small/Mid Cap Equity2.42.2
European Equity2.82.1
Preferred Share Fixed Income1.72.0
International Equity2.11.8
Canadian Focused Equity2.51.7
North American Equity2.61.3
U.S. Equity2.11.1
Canadian Equity Balanced1.81.1
High Yield Fixed Income0.40.8
Global Equity2.00.5
Asia Pacific ex-Japan Equity-0.40.4
Tactical Balanced0.80.4
Global Equity Balanced1.20.4
Canadian Small/Mid Cap Equity2.20.4
Precious Metals Equity-5.90.4
Canadian Neutral Balanced0.80.3
Floating Rate Loans0.40.2
U.S. Money Market0.00.2
Global Fixed Income-0.30.1
Global Neutral Balanced0.70.1
Canadian Money Market0.00.1
2035 Target Date Portfolio1.0-0.0
2030 Target Date Portfolio0.6-0.1
U.S. Small/Mid Cap Equity2.2-0.3
Global Fixed Income Balanced0.1-0.4
Short-Term Target Date0.1-0.4
Global Infrastructure Equity-1.3-0.5
Canadian Short Term Fixed Income-0.4-0.5
Canadian Fixed Income Balanced0.0-0.5
2025 Target Date Portfolio0.2-0.5
Real Estate Equity-0.2-0.9
Global Small/Mid Cap Equity1.1-1.1
2035+ Target Date Portfolio0.4-1.2
Canadian Fixed Income-1.3-1.8
Cdn Inflation-Protected Fixed Income-2.0-3.2
Canadian Long Term Fixed Income-2.7-4.3
Data as of Sept. 30, 2017

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