Morningstar says that 83% of Canadian mutual funds lost money and the median fund lost 5.4% in September. This became fuel for a 10.9% third-quarter loss.

“This is certainly not a surprise given the factors causing havoc in the markets,” said Morningstar analyst Rob Chang in a press release. “Weak economic indicators, earnings warnings, international conflicts and investor distrust have combined to bring the markets down. Naturally, mutual funds felt the pain.”

Morningstar looked at Canadian equity holdings and reported that it saw a sector shift. “Managers are laying the groundwork in anticipation of improving markets,” says Chang. Its analysis suggested that managers are moving into the areas of the market that have been hit the hardest and are looking for stocks that will lead the recovery.

The median Canadian equity fund lost 6.2% for the month and 12.4% for the quarter. The median U.S. Equity fund was down 8.7% for September and 13.6% since June. The categories with positive median returns in September were led by Foreign Bonds with a 2.6% median gain for September, Precious Metals which rang in 1.8%, Canadian Income Trusts with 1.1% and Canadian Bonds, who gained 1.1% for September and 3.4% for the quarter. Also in positive territory were Canadian Mortgages, Canadian Short Term Bonds and Canadian and U.S. Money Market funds were.