Mutual funds in the Greater China equity category have been the best performers in Canada so far in 2017 — and that trend continued in July, according to preliminary performance data released on Wednesday by Toronto-based Morningstar Research Inc.
Thirty-four of the 44 Morningstar Canada fund indices lost ground during the month, with the losses in most cases limited to 2% or less, while nine of the 10 winning fund indices were up by less than 2%.
With a 3.5% gain, the Morningstar Greater China equity fund index was the best performing fund index. Along with Greater China equity, the only other sector-diversified fund category to post a positive result in July was emerging-markets equity, whose fund index increased 1.1%, while the Asia-Pacific equity fund index was flat.
Fund indices representing three sector-specific equity categories were also among the top performers in July: natural resources equity, energy equity and financial services equity gained by 1.8%, 1.3% and 0.1%, respectively.
Although the financial services equity category has produced positive performance so far this year, natural resources equity and energy equity have been the worst performers for the year to date, with their respective fund indices losing 11% and 19.6%, respectively.
Despite these negative results, domestic equity funds were among the best performers in July. The Canadian equity and Canadian dividend and income equity fund indices both lost 0.5%, while the Morningstar Canadian focused equity fund Index lost 0.8%.
The benchmark S&P/TSX composite index had a total return of -0.1% for July despite the country’s three largest sectors — financial services, energy and materials — all posting gains. The industrials sector, with a loss of 3.4% for the month, was the biggest contributor to the negative performance.
The Morningstar U.S. equity fund index decreased by 1.2% for the month. U.S. stock markets did well in July, with the S&P 500 composite index posting a total return of 2.1%, but the Canadian dollar’s strong appreciation against its U.S. counterpart more than offset the gains for Canadian investors.
Also suffering from this currency effect was the Morningstar U.S. small/mid-cap equity fund index, which was the worst-performing equity fund category with a 2.3% loss.
Most fixed-income fund categories ended July in the red, with domestic bond categories being hit particularly hard following the Bank of Canada’s decision to raise its key interest rate on July 12. The Morningstar Canadian long-term fixed-income fund index was the worst performer among all fund categories with a 4.4% decrease, while Canadian inflation-protected fixed-income was down 3.2%.
The largest category in that group, Canadian fixed-income, saw its fund index lose 1.7%. Two fixed-income fund indices increased during the month: High-yield fixed-income and preferred share fixed-income were up 0.2% and 1.4%, respectively.
Morningstar Canada’s preliminary fund performance figures are based on 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.
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