Japanese and Asian equities led the way as nearly four out of five mutual funds made money for their investors in June, according to Morningstar Canada’s monthly survey of fund performance, which was released Tuesday. Emerging markets and Canadian equities also had a good month.

It was the third straight month of strong performance for Canadian mutual funds. More than half of individual funds were in the black during the first half of 2003, marking a major improvement from the first quarter of the year, during which a mere 8% of funds reported positive returns.

While June’s news was good for fund investors, overall returns slipped slightly from the previous month. Two of the 32 Morningstar Canada Fund Indices fell during June, compared with just one in May.

Overall, 79% of the more than 4,600 Canadian funds surveyed by Morningstar made money in June, compared with 94% in May.

Despite June’s impressive numbers, Japanese and Asian funds remained mired in red ink for the first half of the year, said Gareth Tingling, Morningstar Canada’s manager of fund research.

“With the exception of emerging markets, the Japanese and Asian fund indices are among this year’s worst year-to-date performers, and also among the worst over the past one- and two-year periods,” Tingling said. “These indices have some pretty deep holes to climb out of.”

Among the top categories for June, the Japanese Equity Fund Index was up 5.4%, followed by the Asia/Pacific Rim Equity Fund Index at 4.8% and the Emerging Markets Equity Fund Index at 3.3%% and Asia ex-Japan Equity at 3%.

At the bottom, the Foreign Bond Fund Index had the worst one-month return in June with a loss of 1.7%. The only other fund index with a negative return for June was Science and Technology, off 0.3%.

Among the largest categories, The Canadian Equity and Canadian Large Cap fund indices were each up 1.8%, while Canadian Dividend was up 2.3%. Canadian Bond rose 0.1%, Canadian Balanced gained 1%. Global Equity was up 1%. U.S. Equity was basically flat at 0.1%, as was Canadian Money Market at 0.2%.

Mackenzie Financial Corp. has the most funds with a five-star Morningstar Rating, with 25 funds, followed by CI Mutual Funds with 24.

Excluding clone funds (those that duplicate the performance of another fund but have a tax-advantaged structure or come packaged with some additional features), Mackenzie remains the leader with the most five-star funds (11), while AIM Trimark Investments and TD Mutual Funds each have nine on this basis.

On a percentage basis, and among sponsors with at least three top-rated funds, I.A. Michael Investment Counsel retained the top spot. All three of its funds have five-star ratings.