Corporate scandals take their toll on investor confidence

By IE Staff |

Canadian mutual funds have had their worst two months of performance in June and July since the Asian crisis of 1998, according to Morningstar Canada.

Eighty-three per cent of Canadian mutual funds reported negative returns in July, with a median return of -4.1%. Although this was marginally better than June's 84% of funds and a median 5% loss, the combined 8.9% loss over the last two months is the worst two-month setback since August 1998.

"The accounting scandals of June wreaked havoc on investor confidence and this negativity carried over into the month of July," said Morningstar analyst Rob Chang, in a statement. "Disenchanted investors pulling their money out of the equity markets contributed to a two-month loss for mutual funds that was the worst we've seen in four years."

The Canadian equity-based fund categories earned their share of the poor returns, with the median Canadian Equity fund losing 6.5%, while its small-cap cousin lost 7.7%. The median large-cap fund lost 6.7%, while Canadian dividend funds lost 4.1%. The median fund marks the point where half the funds did better and half the funds did worse.

After posting the best returns for most of this year, the once high-flying precious metals funds have apparently come back to earth. Following up a -10.2% June performance with a 13.8% median loss in July, the Precious Metals category had the worst return of the 35 fund categories.

The Global Healthcare sector was the only equity category to stay in the black in July. Posting a 0.2% median advance last month, strength in pharmaceutical firms helped keep this category above water. Fixed-income investments lead the pack by default.

Three more of Mackenzie Financial Corp.'s offerings were awarded five stars in July. With 20, the firm has now doubled the number of five-star funds held by its closest rival -- C.I. Mutual Funds Inc., which has 10.

AIM Funds is next in line with nine five-star funds, while TD Mutual Funds, Clarica and Great-West Life Assurance Company are in a three-way tie for fourth place with eight top-rated funds apiece.

Great West added four new five-star ratings this month to catapult it into the tie for fourth.