Investment funds in Canada suffered another month of severe losses in February, as the global recession showed no signs of a pullback.

Much like in January, almost all of the Morningstar Canada fund indices that track equity categories lost between 5% and 10% last month, according to preliminary performance data released Tuesday by Morningstar Canada.

The financial services equity fund index had the worst return among all fund indices in February with a 10.9% loss. Funds in that category held about three-quarters of their assets in Canada at the beginning of the month, and this result mirrors the 10.6% loss by the S&P/TSX capped financial index.

“Though governments around the world continued to pledge more capital to banks in an effort to restore confidence and increase the flow of capital, general economic uncertainty and the threat of higher loan losses has continued to hurt bank valuations,” said Nick Dedes, fund analyst for Morningstar Canada, in a release.

Real estate equity funds, whose fortunes are closely tied to those of the financials sector, also had a tough month as the real estate equity fund index lost 10.3% for the month. Another sector-specific category, health care equity, posted the third-worst return with an 8.9% loss.

Among sector-diversified categories, the Japanese equity fund index was the worst performer with an 8.7% loss, reflecting both a drop in the benchmark Nikkei index and a weakening of the Japanese yen relative to the Canadian dollar. Elsewhere, the European equity, international equity and U.S. equity indices posted losses of 5.8%, 6.5% and 7.2%, respectively. Domestic equity funds did slightly better last month, with the Canadian equity and Canadian focused equity fund indices losing 5.9% and 5.6%, respectively.

“Weak growth data was a common global theme,” Dedes said. “Notably, the month ended with a downward revision to the fourth-quarter drop in the U.S. gross domestic product to 6.2%, a figure far greater than was forecasted and a sign of an even deeper recession.”

The precious metals equity fund index was one of only two fund indices to post positive returns last month with a 1.9% gain. “The sell-off in global equities drove gold prices to more than US$1,000 per ounce by the latter half of the month, though a pullback in the last week trimmed some of the gains,” Dedes said.

The other winning fund index was greater China equity, which eked out a 0.04% return thanks in large part to a 4.6% surge by the Shanghai composite index — one of the few markets to provide good news last month.

Morningstar Canada’s preliminary fund performance figures are based on the 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 next week.

IE