Investment funds that invest in Canadian equities took a serious hit in November, as the S&P/TSX composite index posted its worst one-month performance in more than five years, according to preliminary performance data released today by Morningstar Canada.

Thirty of the 42 Morningstar Canada fund indices suffered losses for the month.

At the bottom of the rankings with an 8.6% loss was the highly volatile precious metals equity fund index, whose constituent funds hold on average about three-quarters of their assets in domestic stocks. Other categories that experienced heavy losses last month include Canadian small/mid cap Equity (-8.1%), natural resources equity (-7.5%), Canadian focused small/mid cap equity (-6.9%) and Canadian equity (-6.1%).

“While the surge in resources has been beneficial for Canadian equity and small- and mid-cap funds over the past several years, the risks associated with having high concentrations in that area were on full display in November,” says Jordan Benincasa, fund analyst with Morningstar Canada.

Currency movements were once again a major factor affecting the returns of foreign equity funds last month. But while the Canadian dollar’s rise had been detracting from these funds’ performance in previous months, the scenario was the exact opposite in November. Most of the world’s major stock market indexes suffered significant losses during the month as the subprime mortgage fallout and real estate downturn in the U.S. continued to take their toll, but these losses were largely negated by the loonie’s sharp depreciation.

For instance, in the UK, the FTSE 100 Index lost 4.3% but the pound appreciated by roughly the same margin against the dollar during the month. Similarly, the S&P 500 index of large-cap U.S. companies was down 4.2%, but Canadian investors benefited from a 5.1% rise in the U.S. dollar versus its Canadian counterpart. The effect was even more pronounced with funds that focus on Japan, where the benchmark Nikkei 225 Index dropped 6.3% and the yen gained 8.6%.

As a result, the global equity fund Index lost just 0.1% for the month, while the international equity, U.S. equity and European equity fund indices were up 0.4%, 0.3% and 0.1%, respectively. Meanwhile, the Morningstar Japanese equity fund index ended the month with a net gain of 1.6%, its best monthly performance since February.

As is typical during months of sagging equity markets, fixed-income categories found themselves near the top of the fund index rankings in November. Currency effects helped the global fixed income fund index turn in the second-best return overall — a gain of 3.8%. Canadian long term fixed income came in third with a 2% gain, while Canadian fixed income and Canadian short term fixed income ranked fifth and sixth, up 1.2% and 0.8% respectively. Fixed income funds benefited during this tumultuous period on expectations that the U.S. Federal Reserve would cut interest rates in order to ease the liability burden for struggling lending institutions.

Final performance figures will be published next week.