Fixed income mutual funds were the top performers in February, according to preliminary performance data published on Friday from Toronto-based Morningstar Research Inc.
Only seven of the 44 Morningstar Canada fund indices increased during the month, all of them by 0.7% or less, while 12 of the 37 losing indices decreased by 2.0% or more.
The best-performing overall index tracked the floating rate loans fund category, up 0.7% in February, while the fund indices that measure four other fixed-income categories posted increases between 0.1% and 0.3%.
Three fixed-income fund indices ended the month in negative territory, the worst of which was the preferred share fixed income fund index, down 1.0%.
Every major stock market in the world fell in February, with losses typically ranging from 3% to 6%, Morningstar says in a news release. Consequently, all of the 22 fund indices that track equity categories were also in the red.
However, because the Canadian dollar depreciated against most foreign currencies, the losses for many foreign fund categories were limited to 1% or less, while domestic-equity funds generally ended up at the bottom of the performance rankings with more severe losses.
The best-performing equity fund index was Asia Pacific equity, which decreased by 0.01%, followed by global small/mid cap equity, down 0.04%, and U.S. small/mid cap equity, down 0.2%.
In the United States, the S&P 500 index had a total return of -3.7% in February, but for Canadian investors the losses were mostly offset by the U.S. dollar’s 4.2% appreciation against the loonie leading to a drop of 0.6% for the fund index that tracks the U.S. equity category. The global equity fund index, whose constituent funds on average hold more than half their assets in U.S. stocks, followed closely with a 0.7% decline, while the European equity fund index was down 1.8% for the month.
The worst-performing fund indices were the ones that track the energy equity, precious metals equity, and natural resources equity fund categories, decreasing 7.0%, 5.7%, and 5.3%, respectively.
The energy sector continued to impede the Canadian market, which was reflected in the performance of domestic-equity funds. The Canadian equity fund index had a 2.8% decrease, while the other four domestic-equity fund indices posted results ranging from -2.2% for Canadian focused equity to -2.9% for Canadian dividend and income equity. Despite the negative performance, domestic-equity funds still managed to surpass the benchmark S&P/TSX composite index’s total return of -3.0%, owing in part to an underweight to energy stocks. The average fund in the Canadian equity category allocated only 16.9% of its assets to the energy sector, compared to 18.7% for the benchmark.
Final performance figures will be published on next week.